Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — SOCIAL SECURITY

Fraud

Mr. Clifton-Brown: To ask the Secretary of State for Social Security if he will make a statement as to measures which his Department and agencies are taking to reduce social security fraud. [8789]

The Secretary of State for Social Security (Mr. Peter Lilley): Last July, I announced my new security strategy to give new emphasis to prevention and deterrence of benefit fraud. That involves extra checks on benefit claims, matching of information on the Department's computers and the introduction of benefit payment cards to replace order books and girocheques.

Mr. Clifton-Brown: I thank my right hon. Friend for that excellent reply. Does he agree that the biggest personal fraud of pension funds was perpetrated by the late Robert Maxwell? Does he further agree that the biggest collective fraud of pension funds would occur if the Labour party ever got its stake on pension fund holders?

Mr. Lilley: My hon. Friend makes a good point. I suppose that the late Robert Maxwell was almost the only socialist Member of Parliament ever to show a personal interest in private pensions, but my hon. Friend is right to sound the alarm bells at any Opposition suggestions that they want to get state hands on our pension schemes. The hon. Member for Islington, South and Finsbury (Mr. Smith) and the Leader of the Labour party recently visited Singapore—the principal difference between whose system and ours is that the state controls pension schemes—because they want to get their hands on our successful private pensions, which are the envy of the rest of Europe.

Mr. Bradley: We welcome any measures that the Government may introduce effectively to tackle fraud, wherever it may appear in the social security system, but we question why, after 17 years in power, the Government have taken so long to introduce such measures. However, will the Secretary of State clarify exactly what his financial targets are for fraud? There appears to be a contradiction between the Budget Red Book figures and those in his uprating statement. Will he tell us today, therefore, precisely what his annual fraud figures are for 1996–97, 1997–98 and 1998–99?

Mr. Lilley: My objective, which I spelled out in detail when I published the new anti-fraud strategy in July, was

to reduce the fraud level by—we believe that this is possible—about 70 per cent. over a five-year period. To spell out a specific year-by-year path is asking a little too much of a Minister at the Dispatch Box. I can remind hon. Members that we have had no positive ideas on how to reduce fraud from the Opposition, who, in the words of the hon. Member for Sheffield, Brightside (Mr. Blunkett), have for too long been associated with the freeloader.

Mr. Batiste: In his initial answer, my right hon. Friend referred to the social security card. What progress is he making with it? What will it consist of? Will it use new technology? What savings does he expect to make against fraud as a consequence of its introduction?

Mr. Lilley: I am grateful to my hon. Friend for welcoming the card. We are in the advanced stages of reaching agreement and of choosing a final winner in relation to the private finance initiative plans to introduce the card. With it, we shall be able virtually to eliminate fraud and abuse of the order book system, which amounts to about £150 million a year. In due course, we hope to make savings in the administration of handling benefit as well.

Income Support

Mr. Ashton: To ask the Secretary of State for Social Security how many children under 16 years of age are in families receiving income support; and what proportion of all children this represents. [8790]

The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans): Around 2.98 million children are in families receiving income support, representing 25.5 per cent. of all children under 16 in Great Britain.

Mr. Ashton: Are those not appalling figures? One in four children are living at that poverty level, never getting to go to a pantomime, never having any decent toys for Christmas, never getting a change of clothes unless they go to jumble sales or Oxfam, and never going on a school trip or holiday. What has happened to the Tory policy of one nation?

Mr. Evans: Those are disturbing figures. However, if I tell the hon. Gentleman that, of those 2.98 million children, 1.8 million are children of lone parents, he might realise the fundamental social problem. The important point is that, since 1992, we have enabled 200,000 lone parents to move off income support and on to family credit, gaining, on average, £30 a week. With our child care disregard provisions, which have been announced, that trend should be accelerated.

Mr. Harry Greenway: Will my hon. Friend confirm that payments to under-16s in that category are sufficient to ensure a proper and reasonable life style? Will he further confirm that they will not be victimised in the way that they would be if Labour policy on choice in schools has its way?

Mr. Evans: Parental choice in schools, which Conservative Members—if not all hon. Members—strongly support, can lead to additional expense. On the main point of my hon. Friend's question, a judgment must


be made on the levels of income support that the Government believe to be appropriate in all the circumstances, including those that he adumbrated.

Mr. Wicks: Does the Minister agree that, under Beveridge, income support was intended to provide a safety net in the social security system? If one in four children are now dependent on income support, does that not show the failure of Government policy? Have not the Government turned what was once a proud welfare state into an expensive and complex dependency state?

Mr. Evans: No. The fact that income support provided a safety net on a scale undreamed of by the late Sir William Beveridge is a mark of the development of welfare principles in changing social conditions. As I said, 1.8 million—two thirds—of the 2.98 million children referred to in my main answer are the children of lone parents. That is a very real social problem. The way to tackle it is to provide incentives to work, which is what we are doing through family credit.

Fraud

Lady Olga Maitland: To ask the Secretary of State for Social Security what priority has been given to tackling fraud in his social security reforms. [8791]

The Parliamentary Under-Secretary of State for Social Security (Mr. Oliver Heald): The fight against fraud is a top priority. Last year, the crackdown on benefit fraud saved a record £717.6 million from fraud detected and stopped. We are well on the way this year to achieving another record-breaking amount.

Lady Olga Maitland: I thank my hon. Friend for his determined effort to crack down on cheating, because cheating is nothing other than stealing. Will he confirm that, among other measures, the Department plans to visit 1 million homes to check that applications are correct? Will he further confirm that, last year, under that system, there were 9,500 prosecutions, with a 95 per cent. conviction rate being achieved? Is that not a success?

Mr. Heald: I confirm the information provided by my hon. Friend. However, there will be not only the 1 million additional visits, but the bar code scanner, data matching, hotlines, data cleansing, the Post Office reward scheme and the new benefit payment card, all of which will provide a tough range of measures to deal with benefit fraud.

Mr. Frank Field: I congratulate the Government on slowly trying to get to grips with the major issue of social security fraud. [HON. MEMBERS: "Hear, hear."] The operative word was "slowly", but I am grateful for the support of Conservative Members.
Why was it that, when the Government published their report on housing benefit fraud last week, the Department seemed to emphasise fraud by claimants, when most housing benefit fraud is by landlords? Why did the report estimate lost taxpayers' revenue at £1 million when evidence before the Select Committee—which the Treasury Bench is following—estimated it at £2 billion?

Mr. Heald: The housing benefit review published last week was the most detailed study ever of housing benefit

fraud, dealing with more than 5,000 cases and involving 52 local authorities. We believe that the estimate of £1 billion for housing benefit fraud is accurate, although clearly the figure may be higher in some areas and lower in others.
The review called for tough measures to deal with fraud, and that is why my right hon. Friend the Secretary of State announced last week £10 million of challenge funding for local authorities, tough new incentives for local authorities to crack down on fraud and a new housing benefit central register to stop people claiming in one area and then going to another area and claiming again. We shall also be working with the Audit Commission to toughen up the procedures for claiming housing benefit so that we have a system that pays the right amount to the right person at the right time.

Mr. Nicholls: Was there not also a serious social security fraud when the Labour party suggested that the Singaporean way of administering pensions was in some way preferable to ours? Will my hon. Friend remind the House of the difference between the two schemes?

Mr. Heald: Using false representations to obtain benefits is an offence, but that does not apply to Labour politicians making false representations to claim votes. One of my right hon. Friend's initiatives to crack down on fraud is data matching, or comparing one claim against another. That is why we believe that it is instructive to look at the claims made by the leader of the Labour party and compare them with what people such as John Monks and the hon. Member for Birkenhead (Mr. Field) have said. Stakeholding means forcing people to take out a second state pension and putting the funds in the hands of the trade unions. We all know that the rate of return from the Singapore scheme—a stateholding scheme—is 2 per cent. over inflation, whereas the rate of return since 1980 of the British pension funds, which administer our private schemes and have £600 billion-worth of assets, is 10 per cent. over inflation.

Mr. Skinner: More than two years ago, the Public Accounts Committee—chaired by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon)—investigated fraud by employers. Is the Minister aware that the Committee estimated that about £300 million was lost each year because employers were refusing to hand over their employees' national insurance contributions and taxes? In my constituency, a young lad who lost his fingers while working a wood-cutting machine could not claim a single penny piece, because his employer had not handed over his national insurance. As it is more than two years since £300 million was found to be missing, can the Minister tell me how many of those involved have been prosecuted?

Mr. Heald: The hon. Gentleman makes an important point, and it is vital that we have measures that deal not just with claimant fraud, but with fraud by employers, landlords and anyone else. If the hon. Gentleman cares to write to me about the individual case to which he referred, I shall look into it. Nobody must think that collusive employers and landlords are having an easy ride—we are after them as well.

Mr. Stephen: Is my hon. Friend aware that a favourite racket of those involved in fraud is to sub-let their flat


and go and live with friends or relations while continuing to claim housing benefit? What is he going to do about that?

Mr. Heald: My hon. Friend is right, and the measures announced by my right hon. Friend the Secretary of State last Friday will provide substantial help as we try to solve that problem.

Incapacity Benefit

Mr. Wigley: To ask the Secretary of State for Social Security how many people currently receive incapacity benefit; and what was the equivalent figure for invalidity benefit 12 months earlier. [8792]

The Minister for Social Security and Disabled People (Mr. Alistair Burt): At 30 November 1995, just under 1.7 million people were claiming incapacity benefit at either the short-term higher rate or the long-term rate. The equivalent figure for invalidity benefit a year earlier was 1.73 million.

Mr. Wigley: The Minister will recall that his predecessor—the current Secretary of State for Wales—announced on 27 January last year that there would be a saving of £410 million in this financial year from the change from invalidity benefit to incapacity benefit. Given that it is clear that such a reduction in expenditure will not be achieved, will the Minister give an assurance that his Department will not try to claw back that money by making the incapacity test even stiffer? Will the Minister assure the House that the Government will not try to get the money back by, for example, cutting the mobility allowance for hospitals to rake in £40 million? Will he instead find additional resources to maintain the level of support needed by those currently on invalidity or incapacity benefit?

Mr. Burt: A figure that I recognise better is £210 million in the first year. The point that I should convey to the House and to the hon. Gentleman is the outstanding increase in invalidity benefit in previous years—it doubled over a decade. It was important to put a curb on that growth. The figures that I have given to the House show that that has happened. It is too early in the year to say what the savings will be at the end of the year, because of the build-up of case load. I can assure the hon. Gentleman that the incapacity work test will remain properly designed to ensure that those who can work do so, and that those who are incapable of work are not obliged to register for it. We have no intention of changing the test or of making any of the other changes to achieve the object that the hon. Gentleman mentioned.

Mrs. Roe: I welcome the successful introduction of incapacity benefit. Will my hon. Friend confirm that those people who leave incapacity benefit may be helped through improvements to the disability working allowance?

Mr. Burt: Yes, my hon. Friend is quite right. Some 7,400 people are now receiving disability working allowance, with an average payment of £54 a week. Some changes were made this year: the single person's threshold was increased; the couple's allowance was

increased; and, an extra £10 a week is available for those working 30 hours or more. I hope that the disability working allowance becomes better known and is taken up more often, because it is an important part of our progress to ensure that people who are able to work get back in work.

Mr. Alan Howarth: After nine months of the new incapacity benefit, will the Minister accept that recipients of the old invalidity benefit were not, after all, a load of malingerers, scroungers and leadswingers? Why did the Department of Social Security set up its data-recording procedures so that we cannot be told which claimants of incapacity benefit were claimants of invalidity benefit? Is it because the Government do not want us to know how far the living standards of disabled people have fallen because of the reduction in benefit?

Mr. Burt: I do not think that any Conservative Member has suggested that every claimant of invalidity benefit was workshy, a leadswinger or anything else. The Government recognise, but Opposition Members fail to recognise and make clear, that some people who were claiming a benefit from the British people were not entitled to it and should have been on a different benefit. Accordingly, we were prepared to make the hard decisions to change the rules.
Those decisions are justified by the disallowances that have already occurred because of the test for incapacity benefit. Above all, the change proves that, when there are difficult decisions to be taken—that is the responsibility of Government—we are prepared to do so. That is the difference between the responsibility of Government and the failure of the Opposition.

Mr. Ian Bruce: Does my right hon. Friend welcome the initiative entitled Priority 2000, in which private employment agencies are making a commitment to get people with disabilities back to work and to do so at no cost to the taxpayer, with the great benefit of ensuring that people with disabilities who also have abilities can get back into useful work in the economy?

Mr. Burt: Yes. Some excellent projects are taking place all over the country to encourage disabled people back into work, which—in this year, with the implementation of the Disability Discrimination Act 1995—will make the important point to employers that the disabled work force is an important part of the work force and that disabled people are no longer to be discriminated against and will give excellent service. I welcome projects such as the one my hon. Friend mentioned, which will help to progress a change of attitude to assist disabled people into work.

Family Credit

Mr. Winnick: To ask the Secretary of State for Social Security what is the average hourly wage earned by family heads who receive family credit. [8793]

Mr. Roger Evans: The average hourly wage earned by employed family heads who receive family credit is £3.85.

Mr. Winnick: Is it not of some importance that a large majority of those who receive family credit are paid a


very low—in some cases, disgracefully low—wage? Is it not also of interest that, while many Tory Members of Parliament are campaigning to double the parliamentary salary to compensate, in some cases, for loss of consultancies, those same Tory Members are firmly opposed to a decent and fair wage? Does that not show their hypocrisy on this issue?

Mr. Evans: Let me deal with the serious part of the hon. Gentleman's question. If we accept his premise that help should go to those who need it most, we must also accept that the difficulty with a minimum wage is that research has clearly shown that, purely in terms of social security targeting, the richest 30 per cent. of the population would gain more than the poorest 30 per cent. That is because many of the people who are on the lowest wages are members of households in which someone else is in a much higher bracket. At the same time—let us be absolutely clear—a minimum wage destroys jobs.

Mrs. Lait: Does my hon. Friend agree that many of those on family credit are single parents? Did he see last night's "Panorama", in which a 17-year-old pregnant girl was clearly about to join the ranks of those on family credit? That programme focused on Hastings, which outraged many of my good constituents. Could he say how our social security reforms are reducing dependency on the welfare state?

Mr. Evans: I did not see the programme to which my hon. Friend alludes. The important point is that family credit is helping people back into work—including 200,000 lone parents since 1992.

Habitual Residence Rules

Mr. Flynn: To ask the Secretary of State for Social Security what assessment he has made of the effects of the habitual residence rules on British citizens who have lived abroad. [8794]

Mr. Roger Evans: We continue to monitor the position of British citizens who do not satisfy the habitual residence test.

Mr. Flynn: Will the Minister consider the cases of three of my constituents who, for the major part of their lives, have lived in Britain, been British taxpayers and paid national insurance, and are now in real hardship? One of them is a wife, the victim of marital violence, while another is a young woman who is expecting a baby on St. David's day. Was it really the intention of the Government to cheat British citizens and recent British taxpayers of benefits to which they were recently entitled and for which they and their families have paid many times over?

Mr. Evans: If the hon. Gentleman will send me details of the names of his constituents, I shall be happy to look into each of the cases that he has mentioned. I should stress that whether a case meets the test of habitual residence is a matter for the independent adjudicating authorities, and Ministers cannot interfere. The difficulty that he and his Front-Bench colleagues have not addressed is that the reforms, between August 1994 and November 1995, have saved £37 million. To draw up a test that satisfies European law and prevents that sort of abuse was the right way to proceed.

Mr. Hawkins: Will my hon. Friend confirm that the need for the habitual residence test has been highlighted by magazines such as Time Out, which described London as
a honeypot for young Europeans"?
Does he agree that the increasing incidence of benefit tourism has shown that the habitual residence test was vitally necessary and is welcome to British taxpayers, and that our system, when compared with restrictive social security systems on the continent, has been described by Time Out as "generous"?

Mr. Evans: My hon. Friend is right on every point.

Child Support Agency

Ms Rachel Squire: To ask the Secretary of State for Social Security if he will make a statement on the operation of the review procedure of the Child Support Agency. [8795]

The Parliamentary Under-Secretary of State for Social Security (Mr. Andrew Mitchell): A child maintenance assessment may be reviewed on various grounds. A variety of changes have been made over the past year to streamline and improve the procedures.

Ms Squire: Does the Minister share my concern that one of my constituents asked for a review of the basis on which his assessment had been made on 1 August 1995, is still waiting for the review to be completed and is in severe financial difficulties as a result? Will the Minister undertake an investigation of my constituent's case and ensure that appropriate action is taken to prevent any similar delay for my constituents or those of other hon. Members?

Mr. Mitchell: I am aware of that case, as the hon. Lady has raised it with me. I have looked at it personally and found that problems have arisen, some of which are certainly the Child Support Agency's fault. Her constituent's case is now undergoing simultaneously a change of circumstance review and an appeal, and I have given instructions that it should be taken forward as a priority.

Sir David Model: Does my hon. Friend agree that the Child Support Agency still has some way to go before it reaches a reasonable level of accuracy of assessments? Does he further agree that staff in certain offices must show more patience and understanding when talking to our constituents about the complicated, detailed matters which our constituents are obliged to pass on to them?

Mr. Mitchell: My hon. Friend is right to emphasise the importance of civil, courteous and effective treatment by agency staff at all times. Staff training has been increased significantly over the past year. It is important to recognise that, following last year's significant changes, the policy is now fair. The CSA will never be loved, as it enters people's lives at a difficult time. Its key challenge, however, is to continue to improve over the coming months, as it has over the past year.

Ms Lynne: Is it not disgraceful that the Child Support Agency takes on average 211 days to process a claim and,


of those, only 29 per cent. are right? Is it not also disgraceful that the Child Support Act 1991 is emotionally damaging children brought up in lone-parent families? Is it not time that the Government scrapped the Act and brought in a unified family court system?

Mr. Mitchell: The hon. Lady's contribution is typical of the unconstructive suggestions that we hear from the Liberal Democrats. A Liberal Democrat policy document says:
Some Liberal Democrat ideas are difficult to understand and over complicated.
Nothing could be more true of what they say about the Child Support Agency. The hon. Lady should pay tribute to the fact that accuracy in the CSA is increasing and has increased significantly since last year. It has been set a target of 75 per cent. accuracy and is running at just over 70 per cent. I am advised that, in the past month, the CSA's accuracy has approached 80 per cent. of all the cases that have come before it.

Mr. Robert G. Hughes: Does my hon. Friend agree that, although the Child Support Agency has some way to go before it is as good as we all want it to be, hon. Members should congratulate its chief executive on the great improvement that she has made during her time in that job? Will he keep in sight the minority of fathers who can but will not pay, and who do not want to know what it costs to bring up their children, and let them know that the taxpayer will bail them out no longer?

Mr. Mitchell: My hon. Friend is right. I shall pass on his generous and accurate remarks to the chief executive of the CSA. Over the past year, Parliament has made significant changes to the agency's operation. We have introduced the 30 per cent. rule, which means that no absent parent will pay more than 30 per cent. of his or her net income for current maintenance. In addition, we shall shortly pilot the departures process, which will add to the system an important degree of fairness that may have been missing in the agency's early days.

Miss Hoey: Will the Minister consider a simple move that would change attitudes? Will he change the terminology that we use and get rid of the term "absent parent", which no other country with a child support agency uses, and use instead titles such as the "payee", or "non-custodial parent"? The fact that a parent is "absent" does not mean that he or she does not care about the child. Why cannot that change be made immediately?

Mr. Mitchell: The hon. Lady has raised that point before, most recently in the Select Committee, so I am aware of her concern. I agree that the terminology is not entirely satisfactory, but it is not easy to find an alternative form of words to meet our requirements.

Guaranteed Minimum Pension

Mr. Anthony Coombs: To ask the Secretary of State for Social Security what proposals he has to introduce a

guaranteed minimum pension; and what estimate he has made of the cost of a guaranteed minimum pension of £80 a week. [8796]

Mr. Heald: We have no plans to introduce a guaranteed minimum pension. It is estimated that a scheme of this type, based on £80 a week, would currently cost up to £5 billion.

Mr. Coombs: Does my hon. Friend agree that the best way to deal with the challenges of an increasingly aging society is not through a guaranteed minimum pension, which may not be sustainable, but by better targeting of benefits towards those who most need them, and the provision of private pensions? Is it not interesting that it has been announced today that £600 billion is invested in investment funds and pension schemes in this country, which is a far greater sum than is invested in all the other European countries put together?

Mr. Heald: A guaranteed minimum pension would force every pensioner to submit to a means test. It would amount to a tax on thrift. Many people who had a private pension would receive nothing—there could be no greater disincentive to save. As my hon. Friend said, £600 billion is invested in private pension schemes in the UK. That money is invested efficiently, unlike money invested in the stakeholder scheme, in which the trade unions would be involved and which might produce poor returns such as they have in Singapore.

Mr. Denham: Is not the truth that, under the Tories, more than 3 million pensioners are today forced to depend on means-tested benefits, and perhaps 750,000 do not apply for their entitlement? Is it not also true that more than 1 million pensioners receive less than 20 per cent. of average male earnings—the amount provided by the basic state pension alone in 1979? Is not the truth behind the Minister's words that the Government have betrayed today's generation of pensioners and are in the process of betraying tomorrow's?

Mr. Heald: The hon. Gentleman is right: take-up is important. That is why the Government have set up about 80,000 information points to which we send information about pensions so that pensioners are aware of their rights. The hon. Gentleman got carried away with his rhetoric. The rise in pensioners' incomes since 1979 has been 51 per cent. in real terms. Some £1.2 billion of extra help has been given to those on income support. When the hon. Gentleman considers the proposals that he suggests for stakeholding or stateholding, does he think that a return rate of 2 per cent. is anywhere near equivalent to the performance of our private sector pensions, which currently give a return of 10 per cent?

Asylum Seekers

Mr. John Marshall: To ask the Secretary of State for Social Security what recent representations he has received about the payment of social security benefits to asylum seekers. [8797]

Mr. Lilley: I have received a number of items of correspondence about asylum seekers from a variety of sources.

Mr. Marshall: Will my right hon. Friend confirm that 70 per cent. of asylum seekers who are on benefit misrepresented their assets and means when they came to this country, and that 90 per cent. of claims for asylum are shown to be bogus? Do not those facts and the rapid increase in the number of asylum seekers underline the need for action and the sheer irresponsibility of those who oppose any action?

Mr. Lilley: My hon. Friend is right: 70 per cent. of those who claim to be asylum seekers did not, originally, when they entered the country and were asked by immigration officials their reasons for doing so, say that they were seeking asylum—they said that they were visitors, tourists or business men. They had to demonstrate and convince the immigration officers that what they said was true. They had to demonstrate that they had the means to support themselves when here and the means to return home subsequently. They usually showed that they had someone to stay with here. In those circumstances, it seems perfectly reasonable that they should not receive benefit if they subsequently change their story and declare themselves to be asylum seekers. That is the rule that we are introducing under the new regulations.

Mr. Chris Smith: Is the Secretary of State aware that both the Archbishop of Canterbury and Cardinal Hume have recently written jointly to the Prime Minister to express their concern about the Government's proposals? What has his response been—simply to plough ahead? Will he now answer the question that he has consistently refused to answer: when all benefit is withdrawn, how are people to live? How are they to feed their children? Will they starve? Has humanity completely disappeared?

Mr. Lilley: The hon. Gentleman was not here when the statement was made—he was seeking asylum in Singapore, I believe—and consequently he perhaps did not hear the reasons for what we have done and the justification for the changes. As I have just explained, I believe that justification to be sound. The only people who will be required to live on their own resources after making a claim for asylum will be those who have demonstrated to the immigration authorities that they have the resources on which to live. My response, on receiving the letters from the noble prelates to whom the hon. Gentleman referred, was to offer to see them before I made my statement.

Mr. Churchill: Is my right hon. Friend aware of the widespread resentment about the fact that foreign nationals from outside the European economic area can qualify for British social security almost as soon as they arrive in this country? Is my right hon. Friend further aware that Canada has a five-year residence requirement before any foreigner can qualify for Canadian social security? Is it not time that we introduced similar rules in this country?

Mr. Lilley: My hon. Friend is right. Until recently, our rules were considerably laxer than those of most other countries, both as regards people from within the European economic area and those outside it. We have tightened up—rightly—in both cases. We have introduced an habitual residence test, which will, I hope, stop—and has largely stopped—benefit tourism in Europe, and we are tightening up on claims by asylum seekers.
We are also determined to remain a safe haven for people who genuinely seek asylum and are fleeing persecution from abroad. They come here for our freedom, not our benefits.

Child Support Agency

Mr. Miller: To ask the Secretary of State for Social Security what plans he has to improve the accuracy of assessments by the Child Support Agency. [8798]

Mr. Andrew Mitchell: The Child Support Agency has already introduced a range of measures to improve accuracy.

Mr. Miller: Earlier, the Minister spoke about accuracy of between 70 and 80 per cent. That is a tremendous contrast with the last report of the chief adjudication officer, in which he said that only 29 per cent. of assessments were entirely correct.
Is the Minister saying that there has been an incredible improvement, or is the impression, held by hon. Members on both sides of the House, that the Minister is speaking about entirely different sets of figures, correct? I believe that that is what he is doing.

Mr. Mitchell: No. I can tell the hon. Gentleman that the agency has significantly improved its accuracy. The report to which he refers says that the key ingredients to ensure further substantial improvements in accuracy are already in place. I am grateful for the hon. Gentleman's recognition that accuracy, which is at the top of the agency's agenda, is improving.

Mr. Nicholas Winterton: While I commend my hon. Friend on the improvements that have been achieved in respect of the CSA, and on the contribution to them that has been made by Miss Ann Chant, I remain worried about the number of inaccurate assessments. Is it not about time that an independent review or appeal body were established, to which aggrieved mothers or fathers might appeal?

Mr. Mitchell: I thank my hon. Friend for his opening remarks. We continually keep under review whether there are ways in which we might improve the performance and procedures of the Child Support Agency, and we are bearing in mind the argument that he has just made.

Child Support Agency

Mr. Jamieson: To ask the Secretary of State for Social Security how many disciplinary actions have been taken against employees of the CSA who have breached confidentiality of clients. [8799]

Mr. Andrew Mitchell: Twenty staff have been disciplined for breaches of confidentiality since the agency was set up in 1993.

Mr. Jamieson: Is the Minister aware of the case of Mr. Marc Carder of Plymouth, the personal and intimate details of whose case notes were leaked to the media by a member of the Child Support Agency, which led to headlines about his case in the Evening Herald? First,


what will the Minister do to recompense Mr. Carder? Secondly, what will he do to ensure that such action cannot happen again? Thirdly, what he has done about the employee who leaked those details?

Mr. Mitchell: I can tell the hon. Gentleman that the employee who leaked those details has been sacked. The CSA takes breaches of confidentiality very seriously. Three members of staff have been sacked for that offence; all three came from the Plymouth CSA centre.

Asylum Seekers

Mr. Timms: To ask the Secretary of State for Social Security to what extent his proposals for reducing the scope for asylum seekers to claim income support apply to the provision of free school meals to their children. [8800]

Mr. Lilley: Only those entitled to income support are eligible for free school meals for their children.

Mr. Timms: Can the Secretary of State confirm that some asylum seekers will not be permitted to work, will not be able to claim any benefits, and will now not be able to claim free school meals for their children? How does he expect them to live?

Mr. Lilley: That is not the situation. Asylum seekers are entitled to work—and they receive such an entitlement—after they have been in the country for six months. The responsibilities of local authorities under the Children Act 1989 will not change. Local authorities have a duty to ensure that children in their areas do not suffer hardship, and they must make financial provision to prevent that.
We hope that the vast majority of asylum seekers will either be genuine refugees who make that claim at the ports, and will therefore be entitled to benefit, or will have the means to support themselves, be able to demonstrate that fact and be able to support their children. The risk of hardship to which the hon. Gentleman refers therefore does not arise.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mrs. Jane Kennedy: To ask the Prime Minister if he will list his official engagements for Tuesday 23 January. [8819]

The Prime Minister (Mr. John Major): This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

Mrs. Kennedy: Is the Prime Minister aware of the latest Lloyds bank business in Britain survey which shows that business confidence has fallen and that three quarters of companies in the north west have failed to invest? Last week, the Minister for Trade said in the House that Britain is not
in the first division of industrialised nations".—[Official Report, 17 January 1996; Vol. 269, c. 730.]

Does the Prime Minister agree with that statement?

The Prime Minister: Unlike most other countries—some of which the hon. Lady no doubt fondly believes are doing better than us, when they are not—the United Kingdom's output has risen in every quarter for almost four years. It is now 6 per cent. above its previous peak. Growth in 1995 was 2.6 per cent., which is about the level that was forecast by my right hon. and learned Friend the Chancellor. No economy in western Europe has performed as well as the British economy in the past 12 months, or is doing so.

Mr. Kenneth Baker: Does my right hon. Friend agree that parents who send their children to grant-maintained schools and grammar schools should be welcomed as stakeholders? Is it not morally indefensible for such parents to grab privileges for their own children while denying them to other children?

The Prime Minister: I entirely agree with my right hon. Friend. I am glad to see that many right hon. and hon. Members are now using some of the opportunities that my right hon. Friend framed as Education Secretary. The events of the past few days prove that, as they say, the Labour party has changed. Yesterday's Labour party said that it would abolish GM schools the day after tomorrow; today's Labour Members say that they will abolish them once their children have finished their education.

Mr. David Evans: What about the Oratory?

Madam Speaker: Order. Hon. Members are wasting time. I have not yet named the hon. Member for Welwyn Hatfield (Mr. Evans), but I have time to do so before 3.30 pm.

Mr. Blair: We see the baying mob. If Conservative Members think, after the damage that they have done to this country, that they will ride to popularity on the back of a decision about 11-year-old boys, they credit the British people with too little sense.
Will the Prime Minister confirm the figures in today's Confederation of British Industry manufacturing survey, which show that orders are flat and that business optimism is decreasing? Taken with the latest figures on living standards, which show that, last year, living standards fell for the first time for more than 12 years, is it any wonder that the feel-good factor is absent and that the Prime Minister has had to call a special Cabinet meeting for tomorrow to encourage it?

The Prime Minister: Perhaps I may offer my sympathies to the right hon. Gentleman on his current predicament. I am glad that he is supporting the hon. Member for Peckham (Ms Harman) in her decision. He must back her. He certainly cannot sack her, because all she is doing is playing follow my leader.
A few days ago, the right hon. Gentleman said that there were some very good things about Britain, but when it suits his purposes he is quite happy to pervert the statistics to try to score cheap points and damage the country. The facts are that living standards have risen by 40 per cent. since 1979 and take-home pay after inflation has risen by £80 a week for the average family—and it is


expected to rise by a further £450 next year. The right hon. Gentleman cannot name a country in Europe that has an economic performance that equals ours at present, or the opportunities from the platform that we have produced. Not one.

Mr. Blair: I thank the Prime Minister for his kind words of concern about pressure. The difference between us is that I will not buckle under it. [Interruption.]

Madam Speaker: Order. Other hon. Members have questions on the Order Paper and I want to hear them. Let us have order on both sides of the House.

Mr. Blair: Will the Prime Minister confirm that, despite the 25 per cent. devaluation of our currency, we still have a trade deficit with the rest of Europe? The right hon. Gentleman asked for comparisons with Europe. Will he also confirm that, during the whole period of Conservative government, employment and growth levels in investment have been lower than in any other major European country, and that we have fallen from 13th to 18th in the world prosperity league? Is there not now a direct contrast between the speeches of the Prime Minister and the experience and reality of the vast majority of the British people?

The Prime Minister: The right hon. Gentleman should not be so sensitive about his difficulties. I just want to be tough on hypocrisy and tough on the causes of hypocrisy.
If the right hon. Gentleman wants to know about the state of the country, I remind him that we have the lowest level of inflation for more than 50 years, the lowest mortgage rates for 30 years, the lowest unemployment of any major European country, the lowest basic rate of tax for more than 50 years and more inward investment than the rest of Europe added together, and we export more per person than Japan or the United States. Those are the facts about the country. However much the right hon. Gentleman tries to run it down for his own partisan political interests, that is what we have created and those are the opportunities that we will build on, up to and beyond the general election.

Mr. French: Did my right hon. Friend see reports last week about the social services inspector who sought to bring pressure to bear on a children's playgroup because it was said that the toys in use were not of the correct colour and therefore not politically correct? Is he aware that that story emanated from the same local authority that was responsible for the safari boy—a Labour and Liberal-controlled authority that never loses an opportunity to say that it cannot fulfil its responsibilities because it is short of money? It is currently trying to close much-needed adult opportunity centres.

The Prime Minister: My hon. Friend makes his point very clearly without my adding to it. If the leader of the Liberal party wants to comment, he can no doubt turn to his own advisers. Perhaps this is one of the policies that they have told him were "barmy" and "duplicitous", and "would bankrupt the nation".

Mr. Ashdown: When it comes to crimes against humanity, surely there can never be any place for neutrality. Is it not true that no just and durable peace can

ever be built unless justice is not only done but seen to be done against those who perpetrate war crimes? Will the Prime Minister confirm that the Government expect IFOR—and will support it—to take every step necessary to safeguard war crimes evidence, to protect the investigators and to ensure that these people are brought to book?

The Prime Minister: The right hon. Gentleman touches on a very important point. We strongly support the work of the war crimes tribunal and have done more than most to help it with financial support, equipment, and seconded staff; and we have provided evidence to the prosecutor's office.
IFOR will conduct regular foot patrols and aerial reconnaissance over the area. It has been asked to report any unusual activity, such as any attempt to disturb the site.

Mr. Couchman: Will my right hon. Friend take time during his busy day to write to the head teachers of St. Olave's school in Orpington and its sister school, Newstead Wood school for girls, which my daughter attended, to congratulate them on running such excellent schools that they attract pupils from 15 miles and two boroughs away?

The Prime Minister: I am delighted to congratulate those schools on the excellent opportunities they offer their pupils. It is certainly our policy to make sure that every school offers the same sort of opportunity. We believe it right for parents to take those opportunities.

Mr. Bill Michie: To ask the Prime Minister if he will list his official engagements for Tuesday 23 January. [8820]

The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.

Mr. Michie: I want to ask a simple but serious question. The Prime Minister continually describes Britain as the enterprise centre of Europe. [Interruption.] Conservative Members may laugh, but does not the right hon. Gentleman find it unbelievable that Britain cannot afford to supply lifesaving equipment such as a nebuliser and a humidifier to an 80-year-old constituent of mine who suffers from cancer and communicates via a throat microphone? The country apparently cannot even afford to pay £79 of service charges. What sort of enterprise centre is that?

The Prime Minister: I suggest that the hon. Gentleman provide my right hon. Friend the Secretary of State for Health with the details of that case so that it can be examined. If he were genuinely concerned about the matter, that is what he would have done—instead of raising one case out of 8.5 million patients without providing the opportunity to examine its details.
The hon. Gentleman knows that there is a test of whether the health service is doing better. It is not a test that I have set; it was set by the hon. Member for Livingston (Mr. Cook). The test, he said, is whether more people are treated as a result of the health service reforms than ever before. We have met that test: 1.5 million more patients are


being treated. Why does not the hon. Gentleman acknowledge that, instead of raising these cases in this forum, rather than where they should be raised?

Ministerial Visits

Mr. Clifton-Brown: To ask the Prime Minister when he next plans to pay an official visit to Cirencester and Tewkesbury. [8821]

The Prime Minister: I have, at present, no plans to do so.

Mr. Clifton-Brown: If my right hon. Friend were to visit my constituency, he would discover that parents have opted for six out of eight secondary schools to become grant-maintained. Will he commend the principled stand of certain Opposition Members, who made the correct choice of school for their children? Is it not the height of hypocrisy to seek to deny that choice to my constituents and others?

The Prime Minister: I entirely agree with my hon. Friend about that. I believe that the view of most people in the country is that the hon. Member for Peckham was right to exercise choice in favour of her own child. No one objects to that. What is wrong is that the Labour party would deny those same choices to other parents throughout the country.

Engagements

Mr. Salmond: To ask the Prime Minister if he will list his official engagements for Tuesday 23 January. [8822]

The Prime Minister: I refer the hon. Gentleman to the reply I gave some moments ago.

Mr. Salmond: Is the Prime Minister aware that Robert Burns might be birling in his grave in this, his bicentennial year, at the prospect of the Scottish Secretary laying a wreath at his memorial in London? Excise duties, in which the poet might have had a vested interest, have been increased, but can the Prime Minister point to a policy of his Administration that reflects the qualities of compassion, equality, Scottish patriotism and human understanding that flow through the works of Robert Burns? Is there a policy that reflects any of those virtues?

The Prime Minister: I strongly suspect that, if the great poet were here today, he certainly would not support the policies of the hon. Gentleman. He certainly would not support policies of extra taxation that will drive more Scottish opportunities out of Scotland and more Scots out of Scotland, and he certainly would not propose the isolationism that underpins the hon. Gentleman's policies.

Mr. Tim Devlin: rose—

Madam Speaker: Does the hon. Gentleman wish to raise a point of order?

Mr. Devlin: I am sorry, Madam Speaker. Perhaps you could not hear me in the hurly-burly, but I was seeking to raise a point of order. It relates to the method by which people whose names are not recorded in Hansard might indicate whether they were abstaining. I understand that, in a Division last night, the Leader of the Opposition did not vote. I should like to know whether that was an abstention or whether he just failed to appear.

Madam Speaker: Perhaps the hon. Gentleman would ask the Leader of the Opposition—that is not a matter for the Speaker.

Child Support (Appeal)

Mr. Archy Kirkwood: I beg to move,
That leave be given to bring in a Bill to enable liabilities of absent parents assessed by the Child Support Agency to be reduced on appeal where those assessments can be shown to cause exceptional hardship; and for connected purposes.
My Bill seeks to introduce a much more effective and far-reaching system of review of the assessments that are raised by the CSA against absent parents for the maintenance of children from previous relationships. I am pleased to see that the Minister responsible has kindly waited to listen to the debate.
I should make it clear at the outset that nothing in the proposal seeks to disturb the concept that parents have—rightly—a moral and legal duty to make reasonable provision for their offspring. Maintenance payments have always been—and should always be—enforced against a parent who leaves the matrimonial home and can afford to pay, but, despite that, refuses or delays to pay a realistic contribution towards the upkeep of the children. It is important that every effort should be made to encourage prospective parents, particularly prospective fathers, to understand that, in having children, they are taking on a responsibility that lasts for life.
I should also make it clear that nothing in the Bill would detract from my support for the position taken by my hon. Friend the Member for Rochdale (Ms Lynne), who, as social security spokesman for my party, has led a crusade against that unhappy measure, the Child Support Act 1991, having regard, as she has rightly said, to the perverse and pernicious effect of the practice, implementation and enforcement of the Act. I believe that she is absolutely right to seek its abolition.
Sadly, however, I am realistic enough to expect that there is next to no chance of that happening under this Government. If this Parliament runs for another 15 or 16 months, as it may, that is too long to wait for the necessary change. Therefore, this amending Bill seeks to mitigate further the worst effects of the legislation in the short term, pending a new legislative framework which I hope will be introduced in the next Parliament.
I suspect that my case work is far from unique, but I despair every time a constituent consults me about the Child Support Agency. Since I was elected in 1983, I have tried to maintain an active interest in social security and related matters. I accept that it is an area that often involves difficult decisions and the implementation of a complex and technical system that often leaves constituents dissatisfied, but I can usually obtain some measure of reconsideration, reconciliation or redress from the rest of the social security system. However, in my experience, there is no such redress under the Child Support Act system.
In particular, there is no redress for parents separated from their children who are willing to pay but simply cannot afford the level of liability assessed. It is that particular group of people about whom I am particularly perturbed and whose situation the Bill specifically addresses.
I took part in the legislative proposals which brought the 1991 Act into being. I do not believe that it was Parliament's intention to devise a set of circumstances in

which there is no possibility of any real discretion being applied to the facts and circumstances of individuals who are willing to pay but who are being forced into what is effectively perpetual penury without any effective right of appeal on the level of maintenance levied by the agency.
That contrasts vividly with my experience in a previous incarnation in the criminal courts in Scotland, where even people found guilty of criminal offences had the consideration of the sheriff or the judge in the High Court of Justiciary, who, by law, has a duty to consider the facts and circumstances of each individual case before a fine is levied. If that is good enough for criminals, it is good enough for the people being dealt with by the CSA.
I have literally dozens—I have counted—of constituents who are willing to pay but who are caught in exactly the situation that I have described. The latest example that I came across was in Hawick last Friday. The men there are not hothouse flowers—they are usually tough independent characters—but one man was in tears in front of me because his wages had just been arrested. It was obvious from an earlier interview that he was completely riddled with guilt because he could not pay more for his child despite wanting to, but now he had the additional ignominy—in a small community such news gets round town, into the pubs and everywhere—of being known to his mates as someone who could not pay what was required of him by the CSA. That wage arrestment added to his shame.
That man has given up work because he is not much worse off. Of course, arrears accrue in perpetuity, but they are already at a level that he cannot possibly afford, so it is no skin off his nose. What sort of outcome is that? Who wins in such a situation? Certainly he does not win, and certainly the child does not win because this interferes with the relationship between father and child. Certainly the state does not win, because he will end up initially on unemployment benefit and probably on long-term unemployment benefit through the income support system. That is a typically unhappy outcome of a not unusual set of circumstances.
The original Act has existed for long enough for us to judge whether it is doing the job that it was designed to do. Alas, I have concluded that the difficulties that it has produced, and continues to produce, are chronic, complex, endemic and impossible to handle without a radical overhaul.
I accept that the Government have proposed amendments, but they fall considerably short of what is needed to deal with cases such as the constituency case that I described. The so-called departure system that is to be introduced shortly is by no means a deliberative review of individual circumstances. Of course it helps; it introduces the idea that hardship cases can be examined. It does not go nearly far enough, however, and for that reason we voted against the relevant legislation last year—rightly, in my view.
We still maintain that the amendments constitute an inadequate response to problems which we expect to continue after the introduction of the new system in May, affecting in particular absent parents who are still willing to pay some amount of maintenance.
Even more pressure will be put on second families. There is evidence that second families are being badly disrupted by the continuing pressure that they already experience. Who does that help? How does it help the


children? Where, in such circumstances, are the paramount interests of the child? Where is the interest of the absent parent, and where is the interest of the state? In the long run, we must pick up the cost in oneway or another.
For that and other reasons, I consider the current legislation—including the amendments that we anticipate—counter-productive. I believe that this flawed legislation should be scrapped altogether, but if we cannot achieve that until the next Parliament my amending Bill will, I trust, go some small way towards further mitigating its worst effects.
If Conservative Members, and the Government in particular, support the Bill and it becomes law, they will be able to offer constituents who come to their surgeries some hope of an effective opportunity to argue their cases before an independent tribunal that would have power to vary the liabilities assessed by the CSA. If the Government do not support the Bill, it will not succeed; but at least I shall be able to tell my constituents in Hawick that I tried.

Question put and agreed to.

Bill ordered to be brought in by Mr. Archy Kirkwood, Mr. Alan Beith, Mrs. Ray Michie, Mr. Paul Tyler, Mrs. Diana Maddock, Mr. Menzies Campbell, Mr. Chris Davies, Mr. David Rendel, Mr. Don Foster and Mr. Simon Hughes.

CHILD SUPPORT (APPEAL)

Mr. Archy Kirkwood accordingly presented a Bill to enable liabilities of absent parents assessed by the Child Support Agency to be reduced on appeal where those assessments can be shown to cause exceptional hardship; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 16 February and to be printed. [Bill 45.]

Orders of the Day — Finance Bill

(Clauses 36, 105, 112 and 139 and Schedule No. 15)

Considered in Committee.

[MR. MICHAEL MORRIS in the Chair]

Ordered,
That the order in which proceedings in Committee of the whole House on the Finance Bill are to be taken shall be Clause 36, Clause 105, Schedule 15, Clause 139, Clause 112.—[Mr. Heathcoat-Amory.]

Clause 36

CHARGE TO TAX

Mr. Tim Smith: On a point of order, Mr. Morris. May I seek your guidance? Do you anticipate that there will be a debate on clause stand part, or a wide-ranging debate on the first amendment?

The Chairman of Ways and Means (Mr. Michael Morris): The occupant of the Chair never anticipates whether there shall or shall not be a debate on clause stand part until the debate on the amendments has taken place, but the debate on the amendment must be confined to the amendment.

Ms Dawn Primarolo: I beg to move amendment No. 5, in page 24, line 32, at end insert
'provided that the tax shall not be charged until such time as a matching cut in the main rate of employers' national insurance contributions has been made.'.
The amendment's purpose is to bring the rebate in line with the levying of the landfill tax.
The landfill tax was announced in the Budget in 1994 as a tax with an unusual purpose. Rather than raising revenue, it is intended to change behaviour and to encourage the production of less waste by business and consumers, less disposal of waste in landfill sites and, most important, more recycling and other recovery of the value from waste. The detailed proposals to be implemented in the Finance Act 1996 and the statutory instruments that will follow later in 1996 must be measured against that yardstick.
Most important, the subject of the amendment involves the fact that revenue from the tax is to be passed back to business by way of a rebate of employers' national insurance contributions. Within certain limits, rebates will also be given for contributions to certain "environmental trusts". The 1995 Budget confirmed the linkage to national insurance contributions, although it is not complete as the landfill tax is collected for six months from 1 October 1996 and the national insurance contribution rebate comes into effect from 6 April 1997. Our amendment seeks to bring those two dates in line. I should like to explain why that should be done. 
Many detailed provisions, which will be set out in secondary legislation, are pertinent to the rebate, but we cannot discuss them this afternoon. The functioning of the environmental trust scheme, the definition of qualifying


materials and the cost-compliance assessment will be considered in secondary legislation, but it is the rebate that we are concerned with today.
I need to put it on the record that Labour is broadly in favour of landfill charges and that we are not objecting today to the principle. We made it clear in our document "In Trust for Tomorrow" why we supported a landfill tax. It is based on the principle that the polluter should pay, it targets most dangerous waste, and it introduces credits against increased charges for landfill sites that install equipment to generate energy from methane. Charges should reflect differing regional environmental impact, and that must be done alongside a package of other measures.
We agree with the conclusion of the report from the House of Lords Select Committee on Sustainable Development, which states at page 75:
It is not realistic to expect people to change their lifestyles for moral reasons alone. We need appropriate fiscal and legal measures to overcome the barriers to the adoption of more sustainable lifestyles and patterns of consumption".
That is the purpose of the landfill tax. There is serious doubt, however, that that laudable aim can be achieved by the Government's proposals.
The Government state that the aim of introducing the new tax is that the additional costs arising will be passed on to waste producers. For local authorities, that suggests that council tax payers should bear the additional cost through an increase in their council tax bills, which will create, in theory, the incentive for them to reduce waste and to make better use of their waste produce. However, any incentive would be very weak.
The problem with the national insurance rebate is clear because council tax payers pay for waste disposal at an undifferentiated sum within their council tax bills. In addition, authorities are already spending at their capping limits, so any additional cost that is not reflected in those limits could result in serious reductions in services elsewhere. The relationship to the national insurance contribution rebate is crucial. If the desired move from waste disposal to waste reduction and recycling is to happen, there must be a major awareness and education campaign on the issues, so that the public can understand the rationale behind the tax.
The problem with the mechanism in the clause is that the conditions on British landfill sites vary. Disposal without energy recovery is at the very bottom of the waste hierarchy. Likewise, landfill sites without the benefit of modern technology to monitor conditions and recover methane are environmentally a poor option for disposing of waste. Inevitably, waste contains a certain amount of moisture and during the process of that waste breaking down leachates—liquid from waste—sinks to the bottom of the land and methane is produced. By the Government's own admission on page 20 of their draft waste strategy,
landfill sites are the largest single source of methane emissions in the UK, and methane is the second most important greenhouse gas after carbon dioxide.
Therefore, the relationship of the rebate and the environmental trust to those who manage the sites needs to be tightly drawn.
Many of the sites have problems with high levels of leakage, which threaten to contaminate the surrounding environment. Delays in money being made available to improve the sites clearly exacerbate the problem. However, surveys show that half the landfill sites operate the dilute and disperse method, which allows leakage into the soil and water beneath the site with no attempt at controlling it. If those sites are to have access to rebates, that will simply encourage bad behaviour. Some sites use modern engineering techniques to monitor and control gas emissions. Indeed, I know of a good one in Avon, which would not be rewarded for its good practice through the payment scheme mechanism in the clause.
I want now to deal specifically with the national insurance contribution. Treasury press notice 138/94 of 29 November 1994 quotes the Chancellor as saying in the 1994 Budget statement that it was his intention
to look at ways to offset the impact of landfill tax on business, including compensatory reductions in employers' national insurance contributions. This switch in the balance of taxation will discourage an activity which damages the environment while helping to cut the costs of investment.
That was a good statement.
In his 1995 Budget statement, the Chancellor confirmed the switch, saying:
The money raised by the landfill tax will allow for a matching cut in the main rate of employers' national insurance contributions by a further 0.2 per cent. to 10 per cent. from April 1997. That will cut the cost of employment by half a billion pounds and will make it cheaper for businesses to create new jobs."—[Official Report, 28 November 1995; Vol. 267, c. 1064.]
The intention of the amendment is to take the Chancellor's words and put them on the face of the Bill, and it is difficult to see how the Government could possibly object to that.
A clear undertaking has been given time and time again that the tax would be levied and the national insurance contributions would come back at the same time as the compensation. Indeed, the intended reduction was confirmed in the Secretary of State for Social Security's annual national insurance contribution review. Since the annual national insurance changes are introduced by statutory instrument, there is no direct reference to the proposed reductions in the Finance Bill. Consequently, there is no guarantee that the tax will always be offset by national insurance changes in the future. 
In addition, although the tax will be introduced in October 1996, the rebate does not take effect until six months later on 6 April 1997. As the proposals do not affect businesses equally, the process will obviously result in winners and losers. If, as the Government intend, the tax succeeds in deterring dumping on landfill sites, revenues will decrease. That will affect future rates of national insurance contributions. 
To give an example, the Association of Metropolitan Authorities has made the following calculation—local authorities collect approximately 22 million tonnes of waste a year, so the tax will mean an added cost in the region of £154 million a year. The Government's response to the consultation on the landfill tax last year stated:
The concerns of local authorities are also understood by the Government. Local authorities are responsible for the collection and disposal of household waste, and it is recognised that the cost of the tax in respect of such waste that is landfilled will fall on them. The proposed reduction in employers' NICs will affect local authorities and, over the coming months, the Government will address the issue … in the context of the local government finance settlement.


A reduction of 0.2 per cent. in employers' national insurance contributions for the whole of local government only adds up to £30 million. There is therefore a net cost of more than £120 million. This is not accounted for in the local government settlement, and authorities will have to find the money from elsewhere. A further delay in introducing the national insurance rebate will clearly make that situation more difficult.
The net costs arise because local authorities have labour-intensive services, and are therefore likely to benefit more than average from reductions in national insurance contributions. Not only do they dispose of waste generated from their own operations—as would be the case in industry generally—but, as waste disposal authorities, they are responsible for disposing of waste generated within their boundaries.
On Budget day 1995, the Secretary of State for the Environment sought to buttress the considerations of national insurance by saying:
The establishment of environmental trusts will complement and reinforce our policies for sustainable waste management, for example by promoting recycling, and strengthen the environmental credentials of the landfill tax. The trusts scheme has the potential to generate up to about £100 million of private sector expenditure for environmental improvement.
The trusts will be funded by contributions from landfill operators. Local authorities cannot apply to the trust for money because they do not run landfill sites. The money that the operators pay in comes out of their own pockets—it works something like a donation to a charity, on which companies receive tax relief—but they do not pay as much as they would if the rebate did not exist.
Someone more cynical than I am might ask why landfill site operators would want to pay into a scheme that would be a net cost to them, particularly when there is a rebate delay. The idea of the tax is to reduce the amount of waste that goes into landfill, but unless the site operator is also a waste producer, and most are not, why would they want to reduce the amount of waste, which produces their profits, going into landfill? The operators have no incentive to do so, and the manner in which the national insurance contributions are returned does not encourage them.
4 pm
The Government say that site operators will be able to increase their charges to pass on the incentive to the waste producers. Will there be any safeguards on the amount of the charge increases? Could a landfill operator, for example, pass on the cost, not only of the tax but of its contribution to the environmental trust? I shall give another example from my county, while it still exists. Under these proposals, disposal of the waste generated by Avon county is estimated to cost £1.4 million in 1996–97 and £2.8 million in 1997–98, while the total rebate to the authority would be less than £500,000 in the first year. Considerable costs would be borne there, and it is antagonised by the delay.
There should be greater emphasis on providing economic mechanisms to encourage the recycling of construction and demolition waste. One suggestion, beyond a weight-based tax, is to band it to reflect the level of environmental protection in place at different sites. The idea is to discourage un-engineered sites and to encourage further investment in advanced landfill disposal facilities

with containment systems. That would be a sensible way to buttress the national insurance rebate and the applications to the environmental trust for funds—but it does not do that.
Any substantial increase in cost is likely to encourage the cowboy element in the industry, which seeks the cheap option by fly tipping. Although the Government have said that they will look into the problem, the costs of dealing with it are still in doubt and the decisions still have to be made. Like the attempt to label VAT on domestic fuel an environmental measure, the proposed implementation risks of the tax are in danger of discrediting the idea of environmental taxation. It is therefore in the interests of all hon. Members to ensure that the proposals are clearly drafted and that they deliver their drafters' objective.
The Government say that the aim of the tax is to promote a more sustainable approach to waste management. If that is so, why is landfill the only option being considered? Are we sending a signal to the market that landfill is the preferred method of disposal, and are we in danger, therefore, of not making the connections with future development? 
Most commentators say that, if the tax achieves anything, as it stands, it will create a distortion in the market in favour of recycling, re-use and environmentally friendly policies. The theory of environmental taxation is that it should be set at the level of the marginal external costs of the environmental damage, but those costs must include wider considerations than have been given in this submission.
The question is whether the tax achieves its purpose. It does not favour recycling over non-landfill, and incineration or dumping at sea could increase. The tax structure does not recognise the fact that, in some cases, landfill is the best method of disposal from an environmental viewpoint—indeed for some waste it is the only method. In those cases, it operates, at best, as a straight tax on disposal and not as an environmental tax.
The tax does not recognise that, in some cases, material can be of positive benefit in a landfill site while still being waste to the person who is disposing of it. Inert materials are a classic example. They can be used as backfill in mine workings or to cap landfill sites. As a result, the tax does not encourage as much as it might the matching of waste from one business to the needs of another. The tax is a blunt instrument for distinguishing waste according to the degree of environmental damage that it causes.
There will be more incentive for individuals and businesses to evade their environmental responsibilities, both in respect of the fly tipping of rubbish on other people's land and of disposing of material on their own land without complying with licensing requirements under the Environmental Protection Act 1990.
The tax is flawed in one important respect. During the consultations, the Government made it clear that the objective of the tax is to force waste producers either to produce less waste for landfill or to find a place higher in the waste hierarchy for their output. Unfortunately, the current proposals do not do that. 
Most importantly, the proposals do not provide for commitments that were given to the House. National insurance contributions and the tax are levied at the same time. This is a tidying-up amendment that would put into legislation the commitments made by the Chancellor of the Exchequer, over two years, for national insurance


contribution cuts to run in parallel with the levying of the tax. I hope that the House will accept the amendment as a positive contribution to an important debate.

Mr. Tim Smith: The proposed landfill tax has my full support. I have always thought that, if the Government were to intervene in the market to change the environmental behaviour of industry and commerce, the best way would be by means of a fiscal instrument such as this rather than by endless extra regulation of businesses. I believe that it is possible to change behaviour quite quickly by using the tax system. I understand the Treasury's reluctance to adopt green taxes—after all, there will be no net addition to the Revenue.
Our one green tax is the extra tax on leaded petrol, which has been extremely effective in persuading motorists to change to unleaded fuel, with considerable benefit to the environment. The landfill tax breaks new ground, because it is principally a tax on business. It is right that the Treasury should have consulted widely before introducing it, to ensure that it impacts fairly on business.
The tax has my full support, because I have several landfill sites in my constituency. As there is a great deal of gravel in the Thames valley, it has many landfill sites. They are not popular with local people, because they are messy, smelly places. There is no doubt that more could be done to recycle many waste materials, including paper.
The hon. Member for Bristol, South (Ms Primarolo) mentioned the response of councils. Of course they will be concerned if the only option available to them is to pass the costs on through extra council tax, but that is not the only option available. The tax should concentrate the minds of councillors on finding other ways to dispose of the waste. For example, my council—South Bucks district council—has recently introduced the separate collection of waste paper, which will allow it to send paper off for recycling rather dumping it at landfill sites. That is a major step forward. The tax will inevitably encourage other councils to adopt a similar approach.
The important thing for business is to keep a close eye on the objective of the tax. As a matter of principle, it should be levied only where there is a satisfactory alternative that offers an environmental improvement. I guess that that is the case in most examples that one could think of, but I want to mention a company in my constituency, British Alcan of Gerrards Cross, which makes aluminium products. It has a chemical plant in Scotland, which produces not only 220,000 tonnes of an aluminium chemical every year but 220,000 tonnes of red mud.
I am not sure what red mud is, but there is no alternative to dumping it in a landfill site, which the company owns and operates. The company has tried to find alternative uses for the red mud, but nobody seems interested in using it for motorways or anything else for which it might be suitable. As the company operates in an international market with world prices, if we simply impose an extra tax of £7 or even £2 per tonne on what it does, we shall simply render it uncompetitive in that market.
I hope that, when we consider the details of this provision in Standing Committee, we can take the issue a little further forward. I appreciate that today we are

debating only the narrow amendment, moved by the hon. Member for Bristol, South, that the introduction of a national insurance rebate should be brought forward to October. I do not know when those who collect the landfill tax will first pay it to Customs and Excise, but if it is anything like VAT, there will be a four-month delay and the first payment will be in January, although the tax may have been collected in October. A company's cash flow position may therefore be a factor.
I support the tax in principle and hope that my hon. Friend the Minister will look at the matters that I have mentioned in relation to British Alcan in Committee.

Sir James Molyneaux: I am delighted to follow the hon. Member for Beaconsfield (Mr. Smith), particularly in the light of his distinguished record as a Minister in the Northern Ireland Office. Having held that office, he will be as aware as I am of the 26 extremely small councils that will be responsible for handling the landfill tax. He will know that they are starved of resources and that their rating machinery does not compare to the machinery that exists on this island. That is why I have doubts about the principle of the landfill tax.
The hon. Member for Bristol, South (Ms Primarolo) used an unfortunate term in her speech when she said that pressure must be applied on polluters. In Northern Ireland, the "polluters" are those 26 small councils, so it is not fair that the victims should be regarded as the polluters. The councils are not large employers of labour. They provide services mainly to their ratepayers rather than large industrialists with an enormous amount of waste for disposal.
To what extent does the hon. Lady think that those councils would benefit from a cut in national insurance contributions? I doubt whether they would benefit greatly; after all, most of the waste they collect is household waste. They will be compelled to collect the landfill tax mainly from householders, and will then have to resort to imposing the burden on ratepayers.
As the hon. Member for Beaconsfield will understand well, we have a peculiar layer of local taxation called the "regional rate", which relates to some mythical council area in north-east England and is pure guesswork. I cannot see how the councils could benefit from a reduction in national insurance contributions unless they transferred the full burden of collecting the tax and the tax itself to ratepayers in their individual counties. The House will have gathered that I am not making a case for the landfill tax, but I am inclined to oppose it as, particularly in our case, it clobbers the wrong sector.

Mrs. Helen Jackson: I am speaking to amendment No. 5, not because the Labour party opposes the principle of a landfill tax or levy but because we feel that such a tax should be a fiscal instrument that operates in a way that can truly be said to benefit the environment. The costs and benefits of the employers' national insurance contributions have not yet been properly worked out. The amendment attempts to address those issues and highlight the aspects of the landfill tax or levy that still cause great concern to businesses and major employers that are involved in waste disposal and that will therefore be liable to the environmental tax.
When the Environment Select Committee conducted an inquiry into recycling, we were convinced of the case for the waste hierarchy that puts waste reduction at the top, followed by waste recycling or waste recovery through incineration, followed by incineration without any energy recovery, followed by landfill. That hierarchy is roughly correct, particularly in a small, over-populated set of islands such as Britain, where it seems ridiculous to use large areas of land, often in overcrowded urban areas, and to have large, dirty lorries trundling to and fro, causing extra environmental pollution while distributing heavy-duty landfill waste among tips. Such an operation presents a cost to the public, particularly in large, urban conurbations. We are very much in favour of taking whatever measures we can to ensure that those costs are met by businesses in a way that affords better environmental solutions to waste disposal.
My hon. Friend the Member for Bristol, South (Ms Primarolo) also said that large-scale landfill sites that are inadequately managed can also pose a danger. The existence of methane in large landfill sites is well known. If sites are well managed and the necessary resources are provided, the methane can be a source of useful energy recovery; but if the resources are not provided, the site becomes dangerous to the public and to residents living around it. For those reasons, it makes sense to have a fiscal incentive that ensures that the costs to the local community and to commercial waste firms are addressed. We have tabled the amendment because the tax, as presently worked out, does not take proper account of those implications.
There is an absence in the Finance Bill generally of complementary incentives from the other side of the waste industry to accompany the landfill levy. In the Environment Select Committee report on recycling, published on 6 July 1994, we concluded that we did not believe that there was a case for the imposition of a landfill levy at that time. Where a levy was to be imposed, however, we believed that it
should be imposed in order to encourage alternative forms of waste management.
In order to encourage alternative forms of waste management, more effort needs to be taken to complement a landfill levy; to encourage other—

The Chairman: Order. The hon. Lady knows that she is drifting far from the amendment, and we are possibly having a clause stand part debate. I hope that she can return to the amendment.

Mrs. Jackson: Mr. Morris, I think that you will accept that my argument returns directly to the implications of the amendment.
I am arguing that, unless there are alternative incentives for big waste disposal authorities and unless the costs of the landfill levy are counterbalanced immediately by an offset in employers' national insurance contributions, the costs will fall especially on local authorities, which have the overall duty of waste disposal in their areas, in such a way as to constrain their initiatives to promote or put resources into complementary types of waste disposal.
The local authority in Sheffield in whose area I live has a magnificent reputation for incineration combined with heat recovery. It will be unable to continue developing such initiatives if that element of local authority spending

is constrained. The authority estimates that the landfill tax will take £900,000 of its budget in the first year and £1.8 million in the second year. The authority is worried because, to this day, it has received no assurances from the Department of Social Security of the amount or scale of the compensation that will come back to it in the employers' national insurance offset.
Far from the landfill levy being part of an environmental policy that will help to redress the negative side of the waste hierarchy in Sheffield, the good schemes that the authority wants to promote may be constrained by the way in which the tax is levied. A great deal of material that goes into landfill could be used, with a small amount of research and development investment, for anaerobic composting, which could benefit Sheffield's large municipal parks. That is the type of complementary waste operation that may be difficult to cope with as a result of the landfill tax as it is presented at the moment.
The steel industry will be affected. We received a document from the British Iron and Steel Producers Association saying that its initial calculations show that the annual direct gross cost of the landfill levy will be about £18 million and that the national insurance offset will only marginally reduce that. Steel is probably the industry best suited to recycling. I am very proud of the company Stocksbridge Engineering Steel in my constituency, and I am always amazed that its works transforms 10,000 tonnes of messy scrap metal into 12,500 tonnes of engineering steel for use in the aerospace and other specialised industries. That is accomplished in one week, and all the company's products are recycled from scrap metal.
Stocksbridge Engineering Steel, as a major steel producer, simply cannot afford the landfill tax. According to its calculations, it will mean on-costs of 36p for every tonne of steel produced—which will amount to almost £200,000 a year. The firm wants certain elements of the levy to be reconsidered in view of the extra costs that will be imposed.
For example, it requires the definition of waste to be clarified further. The firm wants to know which of its waste will be declared inert waste and which waste will be charged at £7 per tonne. Until it is clear about which of its waste will be charged at £2 per tonne and which will be charged at £7 per tonne, it will find it very difficult to plan and to finance its forward projections on the extra cost to the business. That is of particular concern when, as the amendment points out, firms are still unsure about the benefits that will accrue from national insurance contributions.
There is a further cost and a further complication for the steel industry in areas such as South Yorkshire. Anyone who is familiar with that area will know that there is much derelict steel industry land and many empty factories in South Yorkshire. The technology has changed and, although the industry is not producing less special steel, it is producing it in very different ways in a much smaller area.
The steel industry has been left with large areas of land which can be reclaimed only through landfill operations and it must dispose of its waste, while facing the added costs imposed by the landfill tax. The industry must also pay for the waste that is used to reclaim and redevelop many derelict sites, such as those in Rotherham at Templeborough which are owned by the firm that controls


Stocksbridge Engineering Steel in my constituency. The landfill tax would impose that second cost on the British steel industry, on top of the £200,000 that I have mentioned already.
In addition, it is also unclear whether the disposal of material that is used in reclamation will be subject to landfill tax. I am sure that we will return to many of the issues when we discuss other clauses in Committee, but I think that it is important to raise the matters now in the Chamber. The firm is the largest employer by far in my constituency. Any issue that will cause the firm such financial concern—36p on-costs on every tonne of engineering steel that it produces—is serious. The firm supplies about 60 per cent. of the manufacturing sector with steel, so it will be a problem for manufacturing production nationwide.
I am aware that there are other matters, such as the dredging issue, on which we will have further discussions. I have given the reasons that lead me to believe that the amendment should be considered seriously and supported. The Government have not thought through how the balance of the extra costs of the landfill levy will be complemented by the cuts in national insurance contributions.

Mr. Paddy Tipping: I am pleased to speak to the amendment. I had the opportunity to talk about the landfill tax during the Budget debate, and I welcomed it. I still welcome the landfill tax, and I have now had the opportunity to consider it further. My support for it is still substantial, although I have some reservations about one or two issues.
The importance of the landfill tax in the Budget is that it moves taxation from labour to environmental issues, such as pollution. That must be right, and I look forward to future Budgets pursuing that approach. I am, however, concerned that the landfill tax will come into effect on October 1996, but the discount on national insurance contributions will not come into effect until April 1997. That is the issue that amendment No. 5 addresses.
I strongly believe that those two issues should be closely linked, and that there should be no gap between them. If the Government believe that we should switch taxation from labour to pollution, a clear manifestation of their support would be a timetable that coincided. At the moment, there is a clear six-month gap, and that is not acceptable.
In essence, the aim of the policy is to tax pollution. I wish to examine that aim in relation to domestic waste producers—all of us who put our waste in dustbins. The policy as it stands does not provide the necessary linkage. Although it is a green policy, it is one of which no one will be aware. The ordinary householder will not be aware of the landfill tax, and that is a real weakness.
Local authorities will face some difficulties, as some of my colleagues have already mentioned. It is clear that the landfill tax will cost local authorities more. The final figures have yet to be worked out, but the provisional figures seem to show that the additional cost for local authorities, which collect about 22 million tonnes of domestic household waste a year, will be about £154 million. There will be a reduction in national

insurance contributions of 0.2 per cent. Perhaps the Minister will tell us the level of wages that that national insurance discount will affect. I suspect that it will be about £10,000, so full-time employees will get the discount but part-timers will not.
Nationally, the additional cost to local authorities will be £154 million, but the rebate on national insurance costs might be about £30 million. In other words, local authorities will face a net additional cost of something like £124 million. It is plain as a pikestaff that someone will have to pick up these costs; it seems to me that that "someone" will be the poor council tax payer.
I am particularly concerned about my local authority in Nottinghamshire. Judging by the figures that it gave me just this morning, it seems that the county council disposes of 500,000 tonnes a year of household waste. I should like to praise local authorities, which sometimes do not get the praise that they deserve. Many years ago, there was a move in Nottinghamshire towards incineration. The Eastcroft incinerator disposes of an average 125,000 tonnes of domestic waste a year, leaving a substantial amount—375,000 tonnes—to go into landfill.
I should like to ask the Minister whether the ash from the incinerator will be classified as inert material—an important point. The difference between a disposal cost of £7 a tonne and £2 a tonne—for inert material—can make a great deal of difference to council tax payers. Certain bodies such as the CBI have questioned how the categories into which waste is divided for the purposes of the £7 band and the £2 band are defined. I know that consultations are going on, but the guidelines eventually issued will have to be clearly understood by everyone. This, I am afraid, is yet another example of legislation being passed without the ground rules being clear, and that is not good practice.
As I said, 375,000 tonnes of domestic waste go into landfill sites in Nottinghamshire.

Mr. Tim Smith: Does that mean that no recycling at all is going on in Nottinghamshire? Would not the councils there be well advised to consider changing their behaviour, instead of just passing on all the extra tax to council tax payers?

Mr. Tipping: Of course. Had he been listening, the hon. Gentleman would have heard me talk about the early construction of an incinerator in Nottinghamshire; it heats domestic and industrial properties throughout the city of Nottingham. The hon. Gentleman will also know of the work done by local authorities to recycle paper, glass, and so on. Obviously we should support all such work, but there remains the problem that not all domestic waste can be recycled in that way. A large amount will still go into landfill sites, as it does in Nottinghamshire.
The cost to the local authority next year—a part year—will be £1.3 million, and in 1997–98 it will be £2.6 million. We may set the national insurance discount against that, but it amounts to a mere £130,000. There is clearly a large gap which has to be met by someone. I do not believe that local authorities will meet it; rather, it will be passed on to council tax payers.
I know that local authority associations have taken up the matter recently with Ministers, particularly Ministers from the Department of the Environment, and I expect


that there will soon be a discussion in the House about the financial settlement for local authorities next year. I hope that the Minister will talk to his colleagues in other Departments about this issue, because there is a strong case for examining the capping levels that have been put on local authorities, particularly those that are also waste disposal authorities—usually, county councils.
I look forward to Ministers from the Department of the Environment coming to the House and explaining to us, perhaps next week—

The Chairman: Order. Not this afternoon, when we are discussing the Finance Bill.

Mr. Tipping: I am grateful for your advice, Mr. Morris.
Perhaps Ministers will come to the House shortly—next week or perhaps the week after—to say how the gap between the extra costs to local authorities and the discounts on national insurance contributions, which is what the amendment is about, will be met. I very much hope that the Government will listen to the voice of local authorities on that issue and consider relaxing the cap.
The landfill tax is a potential tax on coal. Electricity generators burn coal. I do not believe that they burn enough. I would like them to burn more and to keep the pits in Nottinghamshire and throughout the country going. The consequence of burning coal is that waste—fly ash—is collected at the end. My hon. Friend the Member for Sheffield, Hillsborough (Mrs. Jackson) spoke about reclamation. Fly ash has been used for many years to reclaim sites. There are areas of dereliction all over the industrial midlands and the north. I would be keen for us to examine ways to discount some element of the taxation on fly ash. It is an issue not just for coal mining areas but, for example, for Bedfordshire, where clay has been extracted from the ground to produce bricks, and, gradually, the pits are being filled. If there is an environmental benefit from that, it deserves careful consideration during the passage of the Bill.
I ask the Minister to confirm that fly ash will be classed as inert waste and taxed at the rate of £2 per tonne rather than £7 per tonne. That is an important issue, as it is eventually a tax on consumers. Although there will be some discount for the generators—for example, PowerGen and National Power—through national insurance, that will not go any way towards meeting the cost for disposing of fly ash. I have figures from both generators. I shall not discuss them this afternoon, but I know that they have written to Ministers on that point.
It is clear that the disposal of fly ash will cost the generators tens of thousands of pounds. My real fear is that, in a competitive energy market, the coal industry, which has declined rapidly over recent years, will once again be put under a very real threat. It is a serious issue, at which the Minister should look. It is linked to the discounting of national insurance charges, and it is not sufficient to make up the extra cost.
There are many other issues that I would like to pursue on the landfill tax, but the appropriate place to do, that is upstairs in Standing Committee. I am concerned about fly tipping. We need to look at that. We need to look at best disposal practice in landfill sites. The landfill tax—I shall not over-egg the case—could lead to difficulties in that regard.
I ask the Minister to consider having a de minimis rule for small operators. As the Bill stands, all operators will have to comply with the legislation.
I am still a supporter of the landfill tax. I am an ardent supporter of green taxation. The points that I make are meant to be helpful to the Minister. I look forward to pursuing them during the next few weeks.

Mr. Ian Pearson: I confess that I am relatively new to the concept of landfill taxes. Almost two years ago, before I was elected to the House, I was a member of a team that visited Slovakia with the president of the Institute of Wastes Management and a person who had a doctorate in composting. We discussed landfill taxes, and the conclusion that the experts reached was that, in the majority of cases, burying rubbish, rather than other methods higher up in the waste disposal hierarchy, was the best solution for the United Kingdom.
I shall make a general observation about the detail behind clause 36. As with many other clauses, much of its effect is hidden in secondary legislation, which will appear later and might get less scrutiny than it deserves. There are three Treasury orders, one Customs and Excise order and 15 sets of Customs and Excise regulations on landfill tax to come.
A press release at the time of the Budget stated that there would be consultation on the secondary legislation in the spring of 1996, and that the instruments would be laid during the summer. It is not clear to me whether that process will include exposure of draft regulations—the provisions of the Finance Bill were not released in draft—so I would appreciate clarification from the Minister on that, and on whether there will be draft regulations for businesses to comment on.
Like other Opposition Members, I do not object in principle to the concept of a landfill tax—a number of us have supported green taxes for a considerable time—and I do not object to the method by which the tax has been raised. I pay tribute to the Government for listening to the voice of industry and moving away from an ad valorem basis of taxation towards cost per tonne. By doing that, we are falling into line with landfill tax regimes in Europe.
At the moment, as I understand it—the Minister will correct me if I am wrong—five European countries have landfill taxes, and all of them have weight-based regimes. Denmark is the most expensive, with a tax of £20.67 per tonne. In France, depending on whether waste is municipal or hazardous industrial, there is a charge of £2.50 or between £5 and £8. The proposed regime seems to be in accordance with that. In Germany, the charge can vary from £10 to £41 for hazardous industrial waste. Whether there should be a higher band for hazardous waste is a potential issue. In Belgium—

The Chairman: Order. What the hon. Gentleman is saying is most interesting, but he must relate his comments to the rebate on employers' national insurance contributions. That might be in order, but just recounting the facts is not.

Mr. Pearson: Thank you, Mr. Morris.
When considering the burdens on business—the Government have made great play of the fact that there is a matching national insurance contributions rebate to


ensure that there is no burden on business—we must ensure that there is a level playing field. Other European countries do not have, and never have had, a matching rebate. What is more, a number of European countries do not force businesses to pay landfill tax. The Government should consider establishing a level playing field across Europe for landfill taxation. I hope that the Minister and his colleagues will press for a common European standard on landfill tax.
The Environmental Services Association, formerly the National Association of Waste Disposal Companies, represents companies that provide waste management and related environmental services. It is the lead body and it shares some of my concerns. It says that it
fully supports the development of a sustainable waste management policy, but is concerned that isolated fiscal instruments may not be the best method of attaining such a policy in accord with the best available technology not entailing excessive cost … principles.
The tax appears to be a one-off, with a matching cut in contributions, as the amendment says. Environmental taxation is not seen in the round. Partly as a result of that—I hope that I am not misquoting him—Peter Neill, the chairman of the ESA, said:
Waste producers—both domestic and commercial—must be aware that this is a tax which will ultimately be paid by themselves.
That is a salient point of which we should be aware.
The views of businesses that emerged from the consultation exercise that began in March 1995 are interesting, and I am surprised that the Government have not supported some of them. According to the official summary of responses to the consultation paper that was published on 1 September, of the 249 responses expressing a view on the Government's landfill tax and their plan to cut employers' national insurance contributions, only 25 were in favour and 173 were against. The Government argue that that imbalance arises because, generally, the businesses that responded were more likely to be net losers than net gainers.
There are clearly winners and losers, but the real reason for that overwhelming opposition is that many employers in the industry recognise that there is no real link between national insurance contributions rebates and reductions, which are basically to do with industrial policy, and an environmental policy, of which landfill tax is one small, isolated, example. It is difficult not to come to the conclusion that the landfill tax proposal and its matching national insurance contributions reduction is a con trick, and that the Government have simply found a new wheeze for raising additional taxation, which has been adopted by five other European countries.

Mr. Tim Smith: That is nonsense. The whole point is that, although the tax is new, it will not raise any extra revenue. The money is being handed back to industry and commerce. One of the greatest tax burdens on industry and commerce is national insurance contributions, because they constitute a levy on jobs. Why does not the hon. Gentleman welcome the reduction?

Mr. Pearson: I welcome the reduction in employers' national insurance contributions, but I am saying that that reduction is a sensible measure that the Government should and would have wanted anyway. I see no

compelling reason for a link between the two. If something is worth doing, it is worth doing for its own sake, and that applies both to environmental taxes and to reductions in national insurance charges.
In addition, there is no guarantee that the 0.2 per cent. reduction will hold in the medium term. If, as seems likely, employers modify their behaviour and, as a result, make less use of landfill, the revenue raised from the landfill tax will decline. The Red Book projections show a surplus yield to the Exchequer through to 1998–99. They say that, in 1996–97, landfill tax will produce a net £110,000 above national insurance contributions reductions. In 1997–98, landfill tax is forecast to bring in £450 million, and employers' national insurance contributions reductions are forecast to cost the Exchequer some £495,000. It is only in 1998–99 that there will be a cumulative surplus yield to the Exchequer. I therefore remain to be convinced of the importance of the link between national insurance contributions and the landfill tax.
Contaminated land is an issue of great importance to my constituency, Dudley, West, in the black country. I have had representations from the Building Employers Confederation and a number of other organisations which are concerned about the effect of the landfill tax on them. Much redevelopment of contaminated land—I have some major developers in my constituency—is undertaken through Government grant regimes.
Government grant is allocated only on the basis that the projects would not proceed unless such money was forthcoming. The landfill tax makes no exemption for contaminated land, so the Government will have to pay out more in grant in order to redevelop the land, or developers will decide that they do not want to proceed with much needed urban regeneration. Exempting waste taken from contaminated land from landfill tax is worth considering.
The tax will also affect my local metropolitan borough council, which currently disposes of 120,000 tonnes of waste per annum. It does not take a mathematician to calculate that, at a rate of £7 per tonne, the cost to the authority will be £840,000 a year. Estimates suggest that the reduction in national insurance contributions will benefit the authority to the tune of about £300,000 but, as a result of the landfill tax, it will be about £500,000 out of pocket, and the cost will almost inevitably be passed to the consumer.
5 pm
The authority is currently engaged in discussions with a number of, companies in connection with an incineration contract that it wants to let. I suspect that there will be a strong trend among authorities that are major users of landfill sites towards incineration. No one would object to that if the incinerators conformed to European standards—environmental benefits would result—but it is feared that they will not.
At present, my local authority makes considerable use of recycling. In the event of a long-term contract with an incineration company, it will try to deliver the best possible deal to council tax payers, but it will lose money. The Government should act, perhaps by means of the "other services" part of the standard spending assessment.
On the one hand, small businesses will be subject to the landfill tax; on the other, they will benefit from national insurance contribution rebates. The tax will, however, be


subject to VAT, which will be charged in accordance with section 19 of the Value Added Tax Act 1994: landfill tax will be deductible in the computation of profits or income for direct tax purposes. The Government should consider exempting small businesses that will have to wade through all the regulations and Treasury orders—and pay extra VAT on their landfill tax.
I think that landfill tax should be aligned with VAT as far as possible. I understand that the Law Society recommended that, and that operators who are not registrable for VAT should be exempt from the landfill tax.
One of the penalties of the tax is the imposition of a separate interest charge on tax shown on returns but not paid by the due date. I have often spoken in the House about the effect of late payment on small businesses, but the House should note that the Bill proposes a complete departure from previous tax arrangements. We are replacing the default surcharge regime with a penalty interest rate. The compounded interest rate of 10 per cent. over the standard rate could rapidly add up to a large sum: with an interest rate of 7 per cent., after three years, the penalty interest could amount to some 66 per cent. of the tax. If it is good enough for the Government to introduce legislation on late payment to raise money for themselves, surely it should be good enough for them to do the same for businesses.

Mr. Austin Mitchell: I support the amendment, as it would delay the onset of the tax, but it would be more sensible to levy a zero rate for inert materials on land disposal sites, because they do not cause the environmental problems that might justify a landfill tax. A zero rate would allow our chemical industries to compete with those elsewhere in Europe.
The Government have introduced the tax as an opportunistic way of raising more money, and they have done so in their usual fashion. Admittedly there has been consultation, but they have ignored the arguments for zero rating for inert materials, thus cutting across long-standing contracts and investments made years before and damaging the competitive position of the firms that made those investments. It is extraordinary that a so-called business man's Government should make no allowance for investment decisions made some time ago, and should suddenly slap on a tax that will penalise British firms that are in competition with European firms that do not have to pay such a penalty.
I raise the issue because the tax will have a serious effect on Tioxide, a Grimsby firm which produces titanium dioxide.

The Chairman: Order. Is the hon. Gentleman going to relate his remarks to—

Mr. Mitchell: rose—

The Chairman: Order. "Order" means "sit down". I hope that the hon. Gentleman will relate his remarks to employers' national insurance contributions. Perhaps he did not hear the hon. Member for Bristol, South (Ms Primarolo) move the amendment, and therefore missed the significance of that issue, which he has not yet mentioned.

Mr. Mitchell: I mentioned it in my introduction, Mr. Morris. Tioxide is a major contributor to Grimsby's

economy, but it will not benefit massively from a reduction in employers' national insurance contributions because it is a capital-intensive, rather than an employment-intensive, industry. The reduction is one way of palliating the blow, but I think that we should do that in other ways.
I was about to cite the decisions that Tioxide made. The main waste product in the production of titanium dioxide is sulphuric acid. Disposal is a problem. There are two possible treatments of the waste: it can be concentrated and recycled, or neutralised to form gypsum. Tioxide decided to comply with the European directive on waste disposal, and opt for the neutralisation treatment. That commercial decision was taken on the ground that gypsum, an inert material, could be disposed of in two ways—first, as an ingredient in plasterboard manufacturing further along the Humber bank and, secondly, in an ex-British Steel ironstone quarry at Roxby, close to the Grimsby site. It planned to fill in the quarry there with the inert material, and the site was to have been made available for various leisure uses once it had been filled in—a sensible procedure.
As a result of that commercial decision, which was taken some time ago, when there were no proposals for a landfill tax in exchange for a compensating reduction in employers' national insurance contributions, Tioxide went in for a two-stage neutralisation system at the Grimsby site. Its substantial investment was tailored to produce gypsum, partly for plasterboard manufacture and partly for disposal in the quarry. The Roxby quarry landfill site was set up with a licence to take only gypsum or similar waste. Tioxide negotiated a direct rail link to the site to minimise disamenity and an agreement to convert the site into a nature park once it had been filled in.
Tioxide took a commercial decision in a competitive titanium dioxide market. Its competitive position will not necessarily be improved substantially by a reduction in employers' national insurance contributions, but it will be changed by the impact of the tax on landfill, the method by which it decided to dispose of the material.
The neutralisation system produced an investment at Grimsby of £27 million. That major decision and investment is now called into question by the sudden imposition of a landfill tax, against which Tioxide has protested. The employers' national insurance contribution reduction is minimal, and inadequate compensation, because competitors in Europe operate on the basis of zero-rating for landfill disposal of such material.
Tioxide was complying with the industry-specific European Community directive that aims to harmonise competition by applying similar environmental constraints to every producer in the sector. The idea of that directive was to reduce liquid effluents and increase solid waste effluents. It therefore encourages firms to use landfill. When European competitors do that, they have the benefit of no landfill tax or of zero-rating for the inert gypsum material that they produce, but Tioxide is suddenly faced with a decision to tax the product in this country.
Tioxide has done its best to meet European requirements, but the Government have come in, with little consideration for the realities, the scale of the investment or the competitive position of the firm, and slapped on a tax, proposing compensation by way of a reduction in employers' national insurance contributions. That compensation is not sufficient, because this industry is not labour-intensive.
Not much can be done with the material except place it in a landfill site. Tioxide has made a long-standing arrangement that will result in a nature park. It is in intense competition with Europe. It has complied with the EC directives and now, suddenly, the Government have blundered in and decided to tax in this fashion. It is typical of the Government's lack of concern for the competitive position of British industry that they can suddenly slap on such requirements—thinking that they are giving some compensation when they are not—and not take the competitive position into account.
The Government should approach this matter by asking: what are the damaging consequences of this material? Is there methane gas? No, there is not. Is it inert? Yes, it is. The problems that would justify the taxation do not arise in relation to this material. It should, therefore, be zero-rated. The national insurance contribution concession is not enough. I ask the Minister to tell me what concessions can be made to compensate a firm such as Tioxide—which has headed into long-standing contracts and commitments and which has invested £27 million in the treatment of waste—for this sudden blow and sudden change in its competitive position vis-a-vis European competitors.

The Paymaster General (Mr. David Heathcoat-Amory): The amendment has given opportunities for a fairly general debate on the landfill tax. May I respond to some of the points raised and correct some of the misapprehensions that exist, especially among Opposition Members?
The landfill tax will essentially do two things—encourage good environmental practice and raise money that will be used to cut the main rate of employers' national insurance contributions. It will therefore help employment and the environment at the same time. The hon. Member for Dudley, West (Mr. Pearson) is right: we are not alone in introducing such a tax. It already exists in Denmark, the Netherlands, France and parts of Belgium and I understand that the Italians are proposing to introduce such a tax. In general, the rates of those taxes are above what we are proposing.

Mr. Austin Mitchell: Is it not a fact that there is zero rating for the disposal of inert materials such as the gypsum that I referred to?

Mr. Heathcoat-Amory: I understand that that is not true. There are a number of specific reliefs and exemptions in some countries, but they do not, as I understand it, cover entirely the point that the hon. Gentleman raised, but I will touch on the case that he instanced.
This is not an environmental European tax. We have no desire to harmonise such tax rates throughout the European Community. We are introducing it in this country because it suits British conditions and it is good for our environment. Also, we can relieve taxation on employment in the way that I have mentioned.
It is not the first time that the British Government have used taxes to encourage better environmental practice, but this is the first tax that will be introduced specifically for environmental purposes. We are using an economic instrument to achieve an environmental goal.
The objects of the tax are to ensure that landfill waste is properly priced and that the charges that are borne by waste producers reflect the environmental harm that is caused. Landfill operators will bear the tax and will have to account for it to Customs, but they will pass on additional costs to those who produce the waste. It is important that the disposal costs that those producers face reflect the full environmental impact of landfill.
That environmental impact can take a number of different forms—the production of methane, which, as the Committee knows, is a greenhouse gas that contributes to global warming; or pollution of groundwater. It may not have a direct environmental effect—it could be in the category of nuisance to local residents. Committee members who have landfill sites in their constituencies will know that landfill operations frequently cause problems of dust, dirt, noise, litter, seagulls and traffic movements. It is important that all those 'external costs are captured and attributed to the waste producer.

Ms Primarolo: The right hon. Gentleman said that the site operators would pay the tax—which we know—and that they would pass that on to the waste producers, presumably through increased charges. We will look at the mechanisms for that in Standing Committee. Local authorities have a responsibility to dispose of other people's waste and industrial waste, and they collect waste within their boundaries. What mechanism does he envisage to ensure that, in those circumstances, the waste producers bear the increased charge? Local authorities have the responsibility to collect but they may be capped or restricted on spending—and they have not yet been told by the Government how they are expected to cope with the loss of revenue resulting from the extra charges that they will have to pay.

Mr. Heathcoat-Amory: The landfill operator will bear the costs and then pass them on to waste producers. I shall deal with local authorities later in my remarks. However, the local authority—a district council, for example—will be in the best position to influence the amount of waste that is landfilled and the amount diverted to recycling or other waste streams. It will be in the best position to take the necessary corrective action.

Sir Roger Moate: Waste disposal diverted into recycling or incineration is more expensive than landfill—even more expensive than landfill plus the landfill tax. Come what may, local authorities will face an extra cost for disposal, which must be paid for by somebody—by the local authority, the national taxpayer or the council tax payer. If we impose a green tax, someone has to pay it. That charge will have to be met in the coming year by some local authorities. Can my right hon. Friend give an estimate of the total revenue that will come from local authorities this year and next year, which will have to be collected from local council tax payers?

Mr. Heathcoat-Amory: My hon. Friend is not entirely correct in saying that alternative waste disposal such as recycling is necessarily more expensive than landfill. For example, with aluminium cans the industry will melt them down to make new aluminium products. That waste stream is, in some cases, cheaper than landfilling that metal. Indeed, there are already a number of good and self-sustaining recycling schemes, even without the


incentive of a landfill tax for material dumped into holes in the ground. The tax will give a further impetus to what is already happening with recycling.
I repeat the point that capturing those external costs, whether they be pollution or a form of nuisance to residents and others, is an important consideration. It will encourage the waste producers, whoever they may be, to look for ways to produce less waste and to reuse and recycle more waste if they cannot avoid producing it. We know that there is substantial scope for businesses and others to adopt better waste management practices. The tax will give them a precise incentive to continue to do so.
In other words, what we are proposing will reinforce the existing policy of sustainable waste management, which was set out in considerable detail in the White Paper published by my right hon. Friend the Secretary of State for the Environment last month. The concept in the White Paper was of a waste hierarchy, headed by waste minimisation. The most desirable aim must be not to produce so much waste. Lower down the hierarchy is re-using waste.
Further down again comes the recovery of waste, which can include recycling, composting and energy recovery from incineration. The hon. Member for Sheffield, Hillsborough (Mrs. Jackson), who is no longer in her place, was under the misapprehension that the landfill tax would somehow act as a disincentive or inhibition on composting. In fact, the reverse is the case, as the hierarchy shows. If waste can be composted, it will avoid landfill tax. At the bottom of the waste hierarchy is disposal, which includes landfill.
The landfill tax will be an important means of moving waste up the hierarchy and away from landfill. The hon. Member for Bristol, South (Ms Primarolo) said, bafflingly, that the tax would send a signal that landfill was the most desirable means of disposal. That calls into question her understanding of the whole principle of the tax because the reverse is the case. By taxing landfill, we are providing an incentive to move to other, more environmentally benign means of dealing with waste.

Ms Primarolo: A study for the Department of the Environment undertaken by Coopers and Lybrand showed that, with a levy on landfill even as high as £20 per tonne, recycling would still remain a relatively unattractive financial option and that the use of the tax alone would not be enough to develop alternatives. Therefore, essentially the Government are saying that landfill is all right or that options that are worse than landfill but cheaper are also all right.

Mr. Heathcoat-Amory: The hon. Lady is now arguing for a much higher rate of tax, which can only double the anxiety expressed by some of my hon. Friends. If she is suggesting that the modest tax we are proposing will not boost recycling in the way that we wish, that is an argument for a higher charge. We do not accept that. Although the tax will not overnight create vast quantities of recycled waste, that might be a good thing. By flooding the market with recycled products, we might kill the very process that we are trying to promote. We believe that the tax rates of £2 and £7 will at least nudge the market towards a greater use of recycled materials and therefore move waste generally up the hierarchy that I described earlier.

Mr. Winston Churchill: Would not the penal rates of taxation on landfill favoured by the

Opposition—as, indeed, they favour penal rates of taxation in almost every area—encourage cowboy tipping?

Mr. Heathcoat-Amory: That is a serious point, which my hon. Friend was right to highlight. All that we have heard this afternoon is reaffirmation that the Labour party is a high taxer by nature. When it sees a tax, its instinct is to raise it.
When my right hon. and learned Friend the Chancellor proposed the landfill tax in his 1994 Budget, he made it clear that he wished to consult widely on the details. That will include secondary legislation—to answer the specific point raised by the hon. Member for Dudley, West. In fact, the details in the Bill are the fruits of the consultation exercise. We thought long and hard about the rates and we also consulted outside interests. The tax will be levied per tonne. The standard rate, which will apply to most waste, will be £7 per tonne.
Following the persuasive representations that were made during the consultation exercise, we decided that there will be a lower rate of £2 a tonne for inactive or inert waste. Examples of this are soil, sand, gravel, brick, concrete, glass and so on. These do not decay to any significant extent and have much less potential to pollute the atmosphere or groundwater with gas.
It remains important to provide an incentive to recycle materials such as aggregates in the construction industry, and these should be taxed in most cases at the lower £2 rate. Taxing such materials will encourage a reduction in the amount of aggregates that are extracted from the ground and will encourage people to seek ways of recycling them wherever feasible.
The differential between the £7 and the £2 rates reflects the different environmental impacts of different types of waste, as well as the arguments that were put to us during the consultation exercise. Customs and Excise is now consulting on the exact details and types of inert waste to be involved.

Mr. Tipping: rose—

Mr. Heathcoat-Amory: I shall anticipate the hon. Member for Sherwood (Mr. Tipping). The question of fly ash is being investigated, and I cannot give a definitive answer at the Dispatch Box as to whether fly ash is genuinely inert or whether it includes some form of pollutant that would put it into the £7 limit. I will make further inquiries about the matter.

Mr. Tipping: I am grateful for the Minister's assurance that the issue is at least being examined. Could he turn his mind to the issue of ash from incinerated domestic waste? Will that be classed as inert? Is there not a case for the classification of soil, for which there should be no charge at all? I make this point not because I am a high taxer, but because I want the tax to be practical and efficient.

Mr. Heathcoat-Amory: The residue from the incineration of domestic waste will bear the landfill tax, but as it has been reduced in volume considerably from the initial waste stream, the overall quantity of household waste will be taxed less if it has been through an incinerator. That, in turn, gives exactly the right signal


to those involved in the incineration of domestic waste, particularly if that includes energy recovery—as it does near the constituency of the hon. Member for Sherwood (Mr. Tipping).
My hon. Friend the Member for Beaconsfield (Mr. Smith) asked me about some specific cases that do not relate to the amendment. As a result, these cases will probably be better examined upstairs in the Committee, of which, I am happy to say, my hon. Friend will be a member.
I ought to make the general point that, even where alternatives to landfilling do not presently exist or where the alternatives are not economic at present, it is important to ensure that the environmental costs of landfilling are properly reflected in the charges paid. That will, in turn, encourage innovation and research into alternatives to landfilling that may not presently exist, and so promote in the future the environmental objectives of the tax to which I have referred.
Much the same argument applies to the point raised by the hon. Member for Great Grimsby (Mr. Mitchell), although I am not fully familiar with the industrial process that he described. I think that the hon. Gentleman said that the first waste product would be sulphuric acid, which would surely be a high-grade, dangerous product to dispose of and would incur in all circumstances a higher charge. The firm which he instanced had put in a process to render that waste inert in the form of gypsum and, in so doing, move it from a higher charge to a lower one and save itself an equivalent sum of money. I will have to investigate the point made by the hon. Gentleman, particularly as I may stray out of order if I continue on that subject.

Mr. Austin Mitchell: I am grateful for the Minister's promise of an investigation. To facilitate such an investigation, I should make clear the point that I was making. There are two methods of waste treatment, and Tioxide chose the second method—to neutralise it to produce gypsum—because of the availability of a British Steel quarry. The infill of gypsum would convert that quarry into a nature park.
That was a commercial decision affecting the company's competitive situation, but the company was not warned by the Government that there was to be a tax on inert material disposed of in this fashion. The company faces competition from other European countries, primarily Germany, where there is no such landfill tax, and France, where inert materials such as gypsum are zero-rated. The Bill will seriously and adversely affect the competitive situation of this firm. Why do the Government not zero-rate inert materials such as gypsum that are environmentally benign?

Mr. Heathcoat-Amory: I have commented on that matter, but I shall look again at the specific point that the hon. Gentleman has raised.
I had better get on more directly to the Opposition amendment, which affects the timings. The tax will come into effect in October of this year, and in a full year will yield about £450 million. That is an approximate calculation, but it is the best we have at present. Because revenue is collected quarterly in arrears, the yield in this financial year will be about £110 million.
The amendment leaves the implementation date in place, but seeks to bring forward the announced cut in national insurance contributions to the same date. This is another enormous uncosted commitment by the Labour party, and blows another hole in Labour's claims to be the party of fiscal rectitude. Labour has landed an enormous bill on to the desk of the hon. Member for Dunfermline, East (Mr. Brown), who is very anxious not to play the old game of giving money away with one hand while putting up taxes with the other to cover the difference.
While Labour has made a big and uncosted commitment, we nevertheless rejoice when it repents of its old high-tax policies. I remind the Committee that in 1979, employers paid 13.5 per cent. in national insurance contributions, including the infamous national insurance surcharge, which was a direct tax on jobs. We have brought the rate down to 10.2 per cent., and it is less than that for lower-paid employees. That is one of the important reasons why we have the lowest non-wage labour costs of any major European economy, and correspondingly low unemployment.
The revenue from the landfill tax will enable us to cut the rate further to 10 per cent. But if Labour really wants to emulate our policies on employment generation, it must adopt all of them—including our rejection of the damaging European social chapter with its possible consequences, and the minimum wage, which would deal a body blow to low earners. I welcome Labour's support for a cut in national insurance contributions, and we will do that as soon as practicable.
The mid-year changes would impose a very significant compliance burden on the businesses which pay it. We are not talking about the 1,400 or so businesses that will be paying the landfill tax, but of the millions of taxpayers who pay national insurance contributions. Those taxpayers would all be affected by any mid-year switch in the rate.
There is another—I think, better—reason for rejecting the amendment, which is that it requires a matching cut that would require us to match the revenue from the landfill tax, penny for penny, with cuts to national insurance contributions. That is considerably less generous than what we are proposing. The tax will raise about £450 million in a full year, but the national insurance contribution cut will cost £500 million in its first full year. The year after that, it will be more generous still and cost some £120 million more than the revenue from the landfill tax.

Sir Roger Moate: That is an important point, particularly in relation to the burden on local authorities. If my right hon. Friend is correct in saying that the national insurance rebate reduction will more than offset the additional costs to be borne by local authorities collecting or paying the landfill tax, does that therefore mean that there is no justification for local authorities—Labour local authorities in particular—suggesting that the tax is a reason for increasing the council tax this year?

Mr. Heathcoat-Amory: There are bound to be winners and losers. Not all businesses or types of business will unequivocally be winners, because they may incur landfill tax charges that are greater than any benefit that they receive in national insurance contributions. That is true for local authorities as a whole.
I should like to say another word about local authorities—particularly to attempt to answer some of the points that have been made by the right hon. Member for Lagan Valley (Sir J. Molyneaux). I am aware that the Environmental Protection Act 1990—which brought into effect a chain of waste management regulations in England, Wales and, subsequently, in Scotland—does not yet apply to Northern Ireland. As I understand it, starting this year, the Northern Ireland Office will introduce equivalent regulations and environmental requirements.
I can make a general point about Northern Ireland that is similar in England and Wales: local authorities are in a good position to influence the amount of landfill tax that they pay because they are the movers and shakers in the recycling, composting and incineration industries as they affect domestic waste. Many local authorities have already made investments in those industries, often with Government support. Indeed, the Government have given or have made available some £50 million-worth of grants to local authorities for investment in recycling.

Mr. Tipping: I accept two of the points that the Minister has made. First, resources have been made available to local authorities through credit approvals and the rest; but more needs to be done. Secondly, local authorities are actively making an attempt in this sphere. The bottom line is that landfill is substantially cheaper than recycling. How can we encourage more recycling when the cost difference between the two schemes is so wide?

Mr. Heathcoat-Amory: We can bridge that gap only by an enormous increase in the landfill tax, which we will not contemplate for many reasons—but the tax helps. The tax sends the right price signal and gives the right incentive to move more of the waste up the waste hierarchy, away from landfilling, towards other means of waste management, including recycling. Local authorities in all parts of the United Kingdom are in a good position to take advantage of that. On grounds of practicality, the cost of administration and because it is of benefit to the great majority of businesses, I urge the Committee to reject the amendment.

Ms Primarolo: The Paymaster General has made some interesting criticisms of our amendment. He attacked it because he said that it was a spending commitment and it reflected our desire to increase the cost of landfill. That is not the case.
I wonder, and the Committee may wonder, whether the Paymaster General knows when the election will be because, even if what he said were true, for it to be a spending commitment we would have to be in power by April, when the mechanism comes into effect. At the moment, I do not think that we will be. The Paymaster General then stood on his head by saying that our amendment, if it goes through, will be less generous and that there will be less money available to assist in landfill. It might have been better had the Paymaster General stuck to the amendment rather than trying to make the rather dubious political points that he made.

Mr. Heathcoat-Amory: To avoid any misunderstanding, let me clearly spell out the fact that the hon. Lady's amendment would bring forward the date of

the national insurance cut to 1 October this year. In the current financial year, that would cost an extra £210 million. That is why I say that the Labour amendment is spendthrift and uncosted.
Our proposals are more generous in the round because—unlike an insistence that we match the cut, penny for penny, to what is raised in future by landfill tax—after the present year and in future financial years, we will give away more in national insurance contribution cuts than we will raise by landfill tax. That is all taken into account in the published Budget arithmetic.

Ms Primarolo: I am fascinated to hear the Paymaster General describe the words of the Chancellor of the Exchequer as spendthrift because the amendment reflects the Chancellor's commitment on matching finance from the employers' national insurance contribution that he made in his two Budget statements literally word-for-word. The Paymaster General is still trying to have it both ways: one minute he says that we are spending money and the next minute that we are not spending enough.
Let us return to the serious debate about the amendment. The Paymaster General has still not explained to the Committee why the original proposals and the statements made to the Chancellor said that matching cuts in the main rate of employers' national insurance contribution would be made. He has not explained why there is the delay, and he has not adequately explained how local authorities will be compensated for increased charges if they fall on the local authorities as a result of the imposition of this charge. In particular, he has not explained how that will affect local authorities that are in serious financial difficulties, regardless of whether they are Labour or Conservative-controlled, although I realise that there are not many Tory-controlled authorities left.
In relation to the national insurance contribution mechanism being used for matching finance, the Paymaster General did not give an undertaking that the mechanism would definitely be in operation in future years. In moving the amendment, I made it clear from the Dispatch Box that an annual decision is taken on national insurance contributions. There is no clear guarantee in the proposals that that mechanism will be permanent or will last for as long as the landfill tax.
Many of my hon. Friends have made it clear that we are concerned not only about the tax's impact on local authorities but about its impact on business and the possible effect of distorting waste management away from the laudable objectives that the Government initially put before us. It is incredible that the sugar beet industry, for instance, will have to pay to put topsoil that has been removed from sugar beet back on to the ground. [Interruption.] If hon. Members wish to intervene, I should be happy to let them. The Paymaster General gave a wide-ranging response to the debate and it seems reasonable that, as I stuck to the amendment in moving it, I should be able to reflect on some of the points that he made before we debate clause stand part.
The tax takes an inert material such as topsoil and charges an industry for putting it in a hole in the ground. The Paymaster General tells us that that is a sensible environment strategy. We do not accept that.
Our amendment seeks only to take a lead from the Chancellor of the Exchequer—something, admittedly, that we do not do very often. We sought to take him as a man


of his word in the two statements that he made, which were reinforced by one from the Secretary of State for the Environment, and put what he said into the Bill. That point has not been answered by the Paymaster General.
I am tempted to go beyond the amendment, but I shall withhold my remarks until the clause stand part debate. We will withdraw the amendment but because of our dissatisfaction, we intend to vote against the clause. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mrs. Ann Winterton: I beg to move amendment No. 1, in page 24, line 35, at end add—
(4) A disposal is not a taxable disposal if the material disposed of consists entirely of soil derived from the processing of agricultural produce.'.

The Second Deputy Chairman of Ways and Means (Dame Janet Fookes): With this, it will be convenient to discuss amendment No. 2, in page 24, line 35, at end add—
'(4) A disposal is not a taxable disposal if the material disposed of consists entirely of dredgings.
(5) For the purposes of subsection (4) "dredgings" means material forming part of or projecting from the bed of—


(a) any river, canal or other watercourse (whether natural or artificial), or
(b) any dock or harbour (whether natural or artificial) which is removed by whatever means.'.

Mrs. Winterton: The amendments raise important issues that should be considered by the Government. The landfill tax is designed to encourage the reduction of wastes. All hon. Members approve of that. However, there are some anomalies that need to be aired and that I hope my hon. Friend the Minister will consider.
The return of uncontaminated soil from agricultural produce, especially from the sugar beet industry, to landfill sites in the area whence it came—merely returning soil to soil—should not be taxable. That case is especially valid because one of the factors that causes the industry's inability to dispose of soil is the restrictions that have been agreed with officials to prevent the spread of rhizomania.
As many hon. Members know, when sugar beet is harvested, some soil adheres to it. In the harvest of, for example, 8 million or 9 million tonnes of sugar beet, approximately 500,000 to 1 million tonnes of soil will also be delivered to the processor, depending on the weather conditions of the season—whether the ground is wet and heavy. In general, the proportion of soil delivered with beet has declined in the British sugar beet industry as it has developed improved on-farm cleaning methods, which must be welcomed. They have resulted in some of the lowest proportions of topsoil delivered with beet in Europe. In France, for example, the proportion of topsoil delivered with beet can be as much as 30 per cent.
When sugar beet is processed, the topsoil is collected separately and conditioned before being sold on for a variety of uses, including horticultural and landscaping work, other recreational amenities, improvements to agricultural land, civil engineering projects and the

capping of landfills. The industry has worked hard to develop markets for the topsoil, and the long-term aim is for all sugar industry topsoil to go to such markets.
In the past, the topsoil delivered with sugar beet was returned to the growing regions whence it came, but this is no longer possible because of the need to control a soil-borne root disease of sugar beet called rhizomania, which entered Britain from the continent. As part of a control policy agreed with the Ministry of Agriculture, Fisheries and Food, topsoil can no longer be returned to beet-growing farms. That has meant that, until alternative markets are developed for the topsoil—which, at present, cannot be marketed—it has to be returned to landfill sites. In 1995, one company involved in the industry sent approximately 500,000 tonnes to nine landfill sites owned and operated by that company.
The intention of the tax is to encourage industries to be more efficient and produce less waste. As the beet industry has done a lot to reduce the quantity of soil leaving farms, the effect of the tax will be merely to increase costs, which have been estimated at between £1 million and £2 million extra annually for the industry, depending on the quantity of soil to be disposed of in a particular year.
To summarise, the return of uncontaminated soil that is representative of a region is merely the return of soil to soil and surely cannot be held to be waste disposal. Indeed, if all the soil could be removed from beet on the farms of origin, there would be no question of attempting to label the soil as a waste. The application of a plant health and hygiene measure to control the spread of an agricultural disease should not be used to charge an extra tax.
The application of the tax where the soil is actively used in the environmental management of a landfill site—for example, in forming the sandwich layers between waste in a landfill or in the final capping of a landfill—will increase the costs of operating landfill sites to no good purpose because the soil will still be needed. Up to a fifth of the contents of a landfill can be soil. Surely it is only equitable that, where soil is placed in a landfill site that is owned and operated by an individual company, and where there is no public facility and no cost to the public, it should be exempted from what is proposed.
I have a constituency interest in respect of amendment No. 2(5)(a), involving the extraction of brine from caverns, which has taken place in Cheshire since Roman times. In the salt purification process, residues are returned via a closed-loop circuit by pipelines to where the brine originates in underground cavities. As no environmental impact arises out of that method of disposal, a landfill tax on salt residues, under the "polluter pays" principle, cannot be justified.
The salt industry, especially British Salt in my constituency, has invested considerable sums in developing the best practical environmental option to dispose of salt purification residues. Unlike soil, there is no market elsewhere for the residues.

The Second Deputy Chairman: Order. I am a little concerned that the matter with which the hon. Lady is dealing relates more to an amendment that has not been selected than to the one that she claims she is speaking to. I am not happy about that.

Mrs. Winterton: I stand admonished, Dame Janet. May I make one final point, however, which relates to a matter raised in the previous debate? The reduction in


national insurance contributions would provide British Salt with an annual saving of approximately £926, whereas the landfill tax at the lower rate would cost the industry £36,000 a year. That would be a tremendous on-cost for the industry that feeds that commodity to the chemical industry.
I hope that my hon. Friend the Minister will look favourably at the case of soil produced as a by-product of the agricultural process and the other matters that I raised, because they are valid arguments and need to be considered carefully. I hope that he will give an encouraging reply.

6 pm

Mr. Andrew Miller: I wish to speak to amendment No. 2 in so far as it affects a number of inland waterways in my constituency. I am grateful to those who tabled the amendment for raising this important issue. The Government must think it through carefully. I hope that the Minister will allay fears by confirming that the Government did not intend to create a tax on inland waterways. I understand from correspondence thus far that that is not the case.
The Manchester ship canal is not just a major route into the ports of Runcorn, Ellesmere Port and further up into Manchester, but a drainage system that collects its water by natural mechanisms from a number of rivers in the Mersey basin. Close to my home in the constituency of the Parliamentary Secretary to the Treasury, the right hon. Member for Eddisbury (Mr. Goodlad), is the River Weaver, which flows into the ship canal. That river deposits material into the canal, and the canal needs dredging as a result. Such natural phenomena should not be subject to a tax, as envisaged by the Bill.
The National Association of Boat Owners often writes to me on issues relating to narrowboats, because of the presence of the canal museum in my constituency. It has drawn to my attention a study undertaken by the Construction Industry Research and Information Association in consultation with waterways organisations and English Nature, which reported that
Dredgings are natural materials which do not arise from any polluting activity, or industrial or commercial process. They are not waste in the conventional sense, and the operator disposing of them does not create them. The tax would not result in a reduction in the amount of material created.
It is a simple phenomenon of the river systems that feed those canals.
They are therefore not the materials, nor are the operators the polluters, at which the tax is aimed.
Clearly, dredging is an essential part of such canal systems. Those not familiar with the area's geography may be interested to know that the lagoons into which much of the dredged material is deposited were not created simply for dumping materials but are a function of the creation of the ship canal, which cut off much low-lying land from the Mersey basin. They have created a wonderful habitat for a number of species. That process, which has continued since the canal was first built, has enriched the environment and it is important to handle it with great care and sensitivity. The Bill would penalise the Manchester Ship Canal Company and, subsequently, users of the ship canal not only for a natural phenomenon but for depositing materials in lagoons that are best served by being recovered and transformed in the same way as other marshland.
A number of other companies have written to me. GATX Terminals Ltd. points out the economic impact on the ports, from Eastham through to Runcorn. When I first moved to the north-west in 1977, a day rarely went by when a large ship did not pass up the canal on its way to Manchester. That no longer happens. The ports are extremely depressed, and financial penalties will put them at further risk.
I have also received a copy of a letter from the chairman and chief executive of Shell UK, which raises some important points. The Stanlow oil refinery abuts the shores of the ship canal in the Ellesmere Port area. Shell points out:
Because of the specific geographical circumstances of the Manchester Ship Canal, about 700,000 tonnes of dredgings are not disposed of at sea".
Instead, they are put into the lagoons that I described earlier.
In many other localities, port authorities could be required to dispose of dredgings at sea but that is not the case in the circumstances that I described. Appropriately, Shell's letter was sent to the Minister for Industry and Energy, and I hope that he brought it to the attention of Treasury Ministers. Shell argues that the proposed tax would impact on the costs to both the Manchester Ship Canal Company and a number of users.
Against that background, the Government should take a fresh look at the case. The materials are not waste materials in a conventional sense, but simply a function of nature. The rivers that feed the waterways create the materials that have to be dredged to keep the commercial, environmental and pleasure facilities open. Those materials cannot properly be regarded as waste materials in the context of the tax.

Mr. Churchill: I welcome the Chancellor's Budget, including the concept of a landfill tax. That tax is intended to be environmentally friendly by taxing landfill tipping of commercial and household waste. However, as it relates to port dredgings, the tax is clearly and categorically environmentally hostile—it is that aspect of the tax which lies at the heart of amendment No. 2.
The impact of the new tax will be devastating for ports throughout the United Kingdom—none more so than the Manchester ship canal. Were this part of the Finance Bill to pass on to the statute book unamended, it would amount to a declaration of war on the Manchester ship canal and the company that operates it. I am sure that that cannot have been the intention of my right hon. and learned Friend the Chancellor—or, indeed, the Government. I therefore venture to hope that my amendment is pushing at an open door.
It is true that the Manchester ship canal no longer carries the volume of traffic of previous years. As recently as the 1970s it was common to see 10,000-tonne container vessels slipping silently up the waterway between fields of cabbages—an amazing sight. Even today, the canal represents an important factor in the economic life of Greater Manchester, Salford and many other communities along its banks. The Manchester ship canal is important to those companies that import vast quantities of grain, and it is especially important to the major oil companies, all of which have oil refineries or terminals on it.
The canal is indispensable to the operations of the numerous companies—the more than 1,350 individual companies—in Trafford Park which the hon. Member for


Stretford (Mr. Lloyd) and I have the honour of representing. Trafford Park is one of the greatest of the Government's many success stories. Thanks to the Government's policies on enterprise zones and development corporations, in the past 10 years, employment in Trafford Park has increased by more than 50 per cent. The number of people who come each day to Trafford Park to earn their living has increased from 25,000 to more than 37,500. Many thousands of those jobs would stand to be blighted if decisions were taken in the House which rendered uneconomical the operations of the port of Manchester, the canal and the Manchester Ship Canal Company that operates it.

Mr. Keith Bradley: I support the amendment and I am grateful to the hon. Gentleman for giving way.
Is it not estimated that the tax on the Manchester Ship Canal Company could be as much as £5 million a year, which would, in itself, put the company out of business? As the hon. Gentleman rightly says, that would have a devastating impact on the regional economy and on the many multinational companies and the smaller companies that thrive owing to the Manchester Ship Canal Company and its support. Will the hon. Gentleman give my assurance to the Minister that the Opposition support the amendment and hope that the Government will recognise its importance to the future of the companies situated on the ship canal and the Ship Canal Company itself?

Mr. Churchill: I am much obliged to the hon. Gentleman for assuring me of his support and for his offer of support from the Opposition. I endorse what he has said about the importance to all the communities in the Greater Manchester area of this great undertaking. It is not only the commercial undertakings that would be damaged were the Manchester Ship Canal Company to go under. Our constituents, over a vast area, would get their feet wet because the ship canal provides drainage for 750 square miles. Not only would the tax have a devastating commercial impact, but the adverse environmental impact would be every bit as great if the company operating the canal were forced into bankruptcy and the canal was allowed to silt up.
In order to keep the canal and the port of Manchester open, the Manchester Ship Canal Company has to dredge no fewer than 1 million tonnes of silt and sludge from the canal each year. It is, for sound economic reasons, discouraged by the Ministry of Agriculture, Fisheries and Food from dumping the waste at sea. It is therefore left with no choice but to dispose of its dredgings on landfill sites. The Manchester Ship Canal Company has estimated that, if the Finance Bill's landfill tax provisions were to pass on to the statute book unamended, the company could face a financial liability of between £1.8 million at the bottom of the scale to £4.7 million at the top, depending on how the water and pollution content of the dredging is assessed by the Customs and Excise.
I am most grateful to my hon. Friend the Paymaster General for his assurance that he does not intend, at least for the time being, to make the water content of dredgings taxable. I am sure that hon. Members will agree that the

Treasury has made a remarkable and important concession. It is a great relief to know that the Treasury has not yet come up with a way of taxing H2o, but doubtless that omission is, even now, being worked on in a broom cupboard in an office in Great George street. For the moment, we have been assured that the water content of dredgings will not be taxable, and I take the Minister's assurance at face value.
If the clause were to pass unamended, the Manchester Ship Canal Company would face bankruptcy and my constituents, and those of other hon. Members, would stand to get their feet wet as a consequence of the canal silting up.
I bring to the attention of my right hon. Friend the Minister the fact that the Manchester Ship Canal Company does not create those dredgings, or such pollution as the dredgings contain. Those come down as silt in the tributaries to the River Irwell and to the ship canal. Nor does the company profit from the disposal of such dredgings, which cost it many millions of pounds a year to remove.
Two years ago, the Manchester Ship Canal Company and the ship canal celebrated the centenary of the canal's opening by Queen Victoria in 1894. The canal is a monument to the spirit of enterprise of the Victorian era and the entrepreneurship of the burghers of Manchester. It continues to serve a vital function, environmentally and commercially.
It would be nothing less than a tragedy if a free-enterprise Government—which the present Administration pride themselves on being—as a result of the Bill, unwittingly forced the Manchester Ship Canal Company into bankruptcy and caused the canal to silt up. I cannot believe that that is the Government's wish or intention. However, I should be enormously grateful to my right hon. Friend the Minister for his assurance about that, because otherwise I shall be impelled to press the amendment to a Division.

Mr. Tipping: The effect of the landfill tax on the sugar beet industry has been mentioned several times. I hope that the Minister will listen to the anxieties that have been expressed on both sides of the Chamber.
I have a direct constituency interest. Although British Sugar's factory at Newark is not in my constituency, many of the suppliers, farmers and producers are based in the Sherwood constituency and in north Nottinghamshire.
I have visited British Sugar's factory at Newark. There are eight similar factories, and I believe that many hon. Members share my worries. I have been impressed by the way in which the factory has become increasingly efficient. The market is highly competitive, and I have no doubt that the management and work force of the factory are keen to maximise profits and make the plant as efficient as possible. Their record speaks for itself.
As sugar beet is lifted, soil is lifted too. Over the years, the amount of soil lifted has been reduced substantially. I understand that between 8 million and 9 million tonnes of sugar beet are lifted annually, which results in about 500,000 tonnes of soil being left as waste. That is an excellent relationship, compared with that in competitor nations. In France, 30 per cent. of the tonnage is soil waste.
In the old days, soil was taken back to the farms and spread on the land, and obviously that was a sensible way to proceed. The difficulty has arisen because of a disease


called rhizomania and the fact that it is no longer considered acceptable to spread that soil on the ground. Other ways of disposing of the 500,000 tonnes must be found.
British Sugar and others have worked on that problem. The residue is used for landscaping, horticulture and other purposes, and more research has been undertaken. In the long term, it may be possible to find other uses, but a substantial amount of soil remains to be disposed of.
In fairness to British Sugar, we should acknowledge that it has set up eight landfill sites of its own. The cost of a landfill tax on the disposal into its sites will be about £2 per tonne. That may cost the sugar beet industry, which competes in a highly competitive market against international concerns, as much as £2 million.
Sugar beet operators are being disadvantaged. I hope that the Minister will undertake to consider the issue carefully, for three reasons. First, sugar beet operators desire to put soil back to soil; it is the way of nature, and they should be helped to do so, not taxed. Secondly, they are forbidden to return soil to soil by Government guidelines and legislation to combat rhizomania. Thirdly, we should acknowledge that the disposal has been done by the company itself in its own landfill sites.
Given that background, for those three reasons there is a compelling case to reconsider the issue and to consider the notion of disposing of soil in that use under a different category—not the inert category, at £2 a tonne, but a new, zero-rated category.
I hope that the Minister will listen to the opinions of hon. Members on both sides of the Chamber, study the amendment carefully and give us the benefit of some further thought on that matter.

Mr. Tim Devlin: I have listened with great interest to the debate, especially to the persuasive speeches of my hon. Friends the Members for Davyhulme (Mr. Churchill) and for Congleton (Mrs. Winterton) and the hon. Member for Ellesmere Port and Neston (Mr. Miller). However, what is suggested in the two amendments may lead us into the danger of creating an interesting anomaly in the way in which the landfill tax might operate, were those amendments to be accepted.
The real problem is the definition of waste in landfill generally. The tax, which would encourage recycling and waste minimisation, is designed to tackle local authority waste and commercial industrial waste, which might be eliminated if minimising such waste were encouraged more. Unfortunately, certain processes, such as the dredging of canals and the washing of sugar beet, inevitably create unavoidable residues that are not, in the usual definition of waste, regarded as waste products. Those residues are simply what has come up from the earth and, when they return to the earth, cannot be regarded as man-made waste. There is an obvious difference between that position and the usual position in a commercial or public landfill site.
The most common items in any landfill site, by mass, are telephone directories. If we seek ways to minimise the bulk in landfill sites, the first thing that we might do is compel all telephone companies to collect their telephone directories and recycle them. That would take about one third of household waste out of any landfill site.
The Minister told the House the environmental reasons for raising the new tax. I strongly support what the Government are doing. I have qualms about the use of

inert material such as soil from sugar beet and dredgings from canals, but let us compare those types of material with the material that is left after ores have been processed. Ores come out of the earth and, after the metal has been extracted from them, a certain amount of rock is left. It comes in the form of pure, inert—albeit chunky—pieces of soil, but it is from the earth and is usually placed into landfill straight afterwards.
There is no way of minimising the amount of inert rock material that results from processing an ore into a metal. I shall give the Committee a specific example. A company in my constituency, Harcros, provides most of Europe's chrome. The chromium ore is mined in South Africa and Russia, it is brought to this country by ship and transported by road to the factory, where it is melted in a giant furnace to produce the chrome which appears on our cars, refrigerators and other domestic appliances which we use every day.
The residue from that process is an inert grey powder which must then go to landfill. The amount of powder resulting from the process cannot be minimised: it is produced in direct proportion to the amount of ore used, which is dependent on how much metal must be extracted. There is no way that Harcross can minimise the waste inert material that it produces. It disposes of the material in clay-pits and it sells the clay to a brick manufacturer next door. The firm owns the landfill site, which is not available for public use.
6.30 pm
The firm can control the amount of waste material produced only by cutting production. Therefore, I am afraid that the landfill tax will impose a severe penalty on that company. If it installs new processing machinery to ensure that there are no poisonous chemicals in the residue, it will not be allowed to offset the cost of the machinery against the amount paid in landfill tax. The company has its own landfill site and it is not depriving others of landfill facilities, but the costs that it incurs will eventually be passed on to the customer.

Mr. Miller: The hon. Gentleman presents a compelling argument in the context of a specific case. However, does he agree that there is a difference between general waste that is derived from mineral exploitation and the circumstances described in amendment No. 2, in that the waste material that is derived from mineral exploitation is manmade, whereas the waste that is found in inland waterways is deposited naturally by the river courses which feed those waterways?

Mr. Devlin: The inland waterways are manmade also. Material is excavated from those waterways by way of a human process in the same way that extracting metal from an ore is a human process. We are in danger of creating an anomaly in that regard.
We may also create an anomaly in the case of development corporations. My hon. Friend the Member for Davyhulme (Mr. Churchill) mentioned the Trafford Park development corporation; the Teesside development corporation is located in my constituency. In both cases, large areas of land—which are called brown-field sites—are being reclaimed. Those areas were previously subject to industrial development and in many cases their reclamation involves removing concrete, tarmac and other


materials. That waste material is removed and used as landfill on another part of the site, or it is taken from the site and landfilled elsewhere.
In such cases, the landfill tax could be viewed as a tax on urban regeneration, as that material must be removed from the surface before any further development can take place. The directors and the board of the Teesside development corporation are concerned about the matter and have raised it with the Department of the Environment. I hope that the Department has passed on those concerns to the Treasury, and I look forward to hearing my hon. Friend the Minister respond to them in due course. 
I invite my hon. Friend to consider carefully the two amendments in the context of sugar beet soil and river dredging. However, there may be other cases—such as urban regeneration and the extraction of mineral ores—where the ordinary operation of the human development process involves the transfer of earth to another site. Rubbish waste is not created, and I question whether it is just to impose a landfill tax in such cases.

Mr. Heathcoat-Amory: I listened carefully to the speech of my hon. Friend the Member for Stockton, South (Mr. Devlin). Many of his points must be considered further in Standing Committee, because they fall outside the scope of the two amendments under consideration. However, I do not dismiss his remarks and I can reassure him that, if the spoil and waste from mining are not categorised as controlled waste, they will not be taxable under the proposals. My hon. Friend went on to describe an industrial process which would be taxable.
On amendment No. 1, the case for exemption for processing certain agricultural waste soil was advanced very ably by my hon. Friend the Member for Congleton (Mrs. Winterton). I know that my hon. Friend the Member for Newark (Mr. Alexander)—who could not be present—is also concerned about the issue. He has sugar beet growers and processors in his constituency and he fears that the new tax will damage that industry. The hon. Member for Sherwood (Mr. Tipping) made a similar point.
I have listened carefully to the views expressed, but I stress that the landfill tax is designed to encourage all waste producers to reduce the amount of waste produced. In this instance, the soil that adheres to the sugar beet during processing is a waste product and must be disposed of in some way.
British Sugar has reduced the amount of soil that adheres to sugar beet roots so that it has to wash and transport less waste material, and the landfill tax might be an incentive to reduce waste even further. The industry is also exploiting the market for good-quality soil that is washed from the sugar beet. There is a ready market for such soil in some parts of the country. It is used for landscaping landfill sites, golf courses, and so on. At present, the industry disposes of some soil in that way, although the concentration of nine processing sites in the eastern part of the country has caused some market saturation in those counties.

Mrs. Ann Winterton: I refer my hon. Friend to another valid argument. British Sugar is no longer allowed to dispose of waste soil at the site from which it was taken originally. That was the usual practice until it was restricted by the Ministry of Agriculture, Fisheries and

Food in an attempt to stop the spread of rhizomania. Will my hon. Friend and his Department examine the problem and perhaps advance some helpful proposals?

Mr. Heathcoat-Amory: My hon. Friend has told the Committee about rhizomania and the restrictions placed on British Sugar about returning the soil to the areas where sugar beet is grown. Those restrictions do not prevent the soil from being used for landscaping, and it can be returned to agricultural use for pasture. The restrictions are important for the suppression and prevention of rhizomania.
The case for an exemption has not been made, but I wish to be helpful to my hon. Friends and other hon. Members who have raised the issue. I will ensure that the Ministry of Agriculture, Fisheries and Food discusses the matter further with British Sugar to see whether the agreement to prevent rhizomania can be relaxed or adapted to permit British Sugar to dispose of surplus soil in ways that are impossible at present.
Furthermore, I will ensure that Customs and Excise, for which I am responsible, continues its fruitful discussions with British Sugar. Those two organisations could define the problem exactly, and examine the possibility of allowing the company to set some of the soil aside in storage, temporarily and without paying the tax, pending the return of the soil or its sale to markets. The continuing discussions will assist the company concerned and other root and vegetable processors in trying to ameliorate the impact of the tax. One of the aims of the tax is to give an incentive to do what the company is already doing—to seek other markets and other ways to dispose of the soil.

Mr. Tipping: I am grateful for the interest that the Minister has shown in the subject and for the discussions that are to take place between British Sugar and Customs and Excise. In those discussions, will the excise be mindful that British Sugar disposes of the waste itself? The waste goes to its own sites and it bears the costs. In effect, the whole operation is financially neutral and that may be an area for fruitful discussion.

Mr. Heathcoat-Amory: I am aware of that point, and I will emphasise it to the officials.
Amendment No. 2 deals with dredgings, and the case for exempting them. I am aware of that case because, during the extensive consultation that took place, it was made repeatedly by those who own and operate ports and waterways. Dredgings are currently within the scope of the tax, because they are controlled wastes under Department of the Environment regulations. Therefore, disposal of that material to landfill is taxable. However, that illustrates the point that such material that is not landfilled—in other words, disposed of at sea, on the bank of a canal or on land in other ways—is not taxable. So, much of such material does not fall within the tax. However, some of it does have to go to landfill and will fall to be taxed.
I wish to emphasise the point, which was made by my hon. Friend the Member for Davyhulme (Mr. Churchill), that such material is only dry waste. He made light of that point, but some of those who are complaining about the impact of tax have mildly exaggerated its effect by including all the water that may be mixed up with the materials that will be landfilled. A conversion factor will


be applied, and we are seeking to tax only dry weight. However, I accept the point that some dredgings must be landfilled and will fall to be taxed.
My hon. Friend the Member for Davyhulme made several powerful points, as did the hon. Member for Ellesmere Port and Neston and other hon. Members who are familiar with that important canal and waterway. The distinction that can fairly be drawn in this case is that the waste that operators are disposing of exists only through natural forces. I accept that point. The soil and the silt that they are dredging are being returned to dry land. As has been pointed out, dredging has the beneficial result of keeping waterways clear for navigation and preventing floods.
Dredgings form a relatively definable category of waste that it was not the intention of my right hon. and learned Friend the Chancellor to tax when he announced his proposals to the House more than a year ago. I cannot accept amendment No. 2, because it would amend the wrong part of the Bill, and we need to define further exactly how an exemption would operate. I hope that the Committee will accept that I wish to find a way of exempting dredgings. With that assurance, I hope that the amendment will be withdrawn.

Sir Donald Thompson: Will my hon. Friend give way?

Mr. Heathcoat-Amory: My hon. Friend is just in time.

Sir Donald Thompson: Would it not be paradoxical if some canals were to attract derelict land grant for clearing and restoration, as they do now, and were simultaneously taxed?

Mr. Heathcoat-Amory: Life is full of paradoxes, but we can probably do without that one. In the spirit of what I have announced, I hope that my hon. Friend the Member for Davyhulme will withdraw the amendment.

The Second Deputy Chairman: Order. The hon. Member for Davyhulme does not need to do so, because amendment No. 2 has not been moved.

Mr. Churchill: I wish to express my appreciation to my hon. Friend the Minister, to the Chancellor and to the Government for accepting the clear-cut case that those of us who have spoken to the amendment feel exists for exempting canal and port dredgings from the ambit of the tax. I am most grateful to my hon. Friend for his comments, and I am delighted to accept his assurance that a suitably drafted amendment will be introduced later during the passage of the Bill. On that basis, I am more than happy not to press amendment No. 2.

Mr. Miller: My hon. Friend the Member for Manchester, Withington (Mr. Bradley) and I have listened to the Minister's response about the Manchester ship canal. Given the powerful arguments that have been advanced, will the Minister assure us that, before a new amendment is introduced, he will urgently consult those companies and their representatives from that river basin? This is an important issue.

Mr. Heathcoat-Amory: This subject has been characterised throughout by a willingness to consult, and

we will continue that. We hope to exempt dredgings in a precise way that does not give rise to any ambiguity, and we shall consult on the wording.

Amendment negatived.

Question proposed, That the clause stand part of the Bill.

Mr. Roger Stott: May I first apologise to the Minister? I had to leave the Chamber when he was replying to the remarks that were made on amendment No. 5. I wish to say what I would have said had I remained in the Chamber at that time.
The right hon. Member for Lagan Valley (Sir J. Molyneaux) said earlier that the polluter must pay. I have no problem whatever with that, but I have a problem with clause 36.
The hon. Member for Davyhulme (Mr. Churchill), who is just leaving the Chamber, and my hon. Friend the Member for Manchester, Withington (Mr. Bradley) will be aware that the metropolitan authorities in the old Greater Manchester area joined together to become their own waste disposal authority. My local authority, the metropolitan borough of Wigan, which has a population of almost 250,000, decided some years ago to pull out of the Greater Manchester waste disposal authority. As a former mining area, Wigan can dispose of its waste considerably more cheaply alone than if it remains part of the authority. This arrangement has applied for the past five or six years.
I want to stress that what we are putting in the landfill sites in my constituency and in three or four others in old mining areas is domestic waste. We are not putting in industrial waste. I have visited the landfill site on many occasions, and I am convinced that it is extremely well managed. The methane is extracted safely, and there are special precautions to prevent leaching into the water courses. The tip is sprayed and covered each evening. The Minister talked about the nuisance created by seagulls. My local authority, which owns the tip, has engaged a falconer who comes along with his falcon and scares away the seagulls.
Even disregarding the employers' national insurance contributions, this tax will mean that council tax payers in the metropolitan borough of Wigan will have an additional burden placed on them. My authority is already rate-capped. It owns the landfill site, it manages it properly and it then reclaims the land for community purposes. The tax will amount to a wheelie bin tax on the council tax payers of Wigan.
I have no problem with making polluters pay for their waste, stored in landfill sites or elsewhere, but I hope that my hon. Friends will press again in Committee the point that the tax penalises my local authority for putting domestic waste in a landfill site that we own and manage. Even taking into account the money that will come back to the local authority in the shape of national insurance contributions, we shall be about £750,000 worse off as a consequence. That cost will fall directly on my constituents and on the rest of the metropolitan borough. It is therefore not a good idea, and I hope that something will be done about it at a later stage of the Committee's proceedings.

Mr. George Walden: I am sorry to say that what is poison for one constituency is pure honey for another. My constituents will be delighted with this measure. There was a rash of applications for landfill sites a few years ago. When I looked into the detail, I found to


my horror that, for various historical and geological reasons, Britain is covered with quarries and disused gravel pits—most of them in my constituency. I then discovered that we were turning our country into a place where other countries were attracted to dump their rubbish. I learned that, for geological reasons and because of the availability of sites here, the costs were horrifyingly low. Other countries also offer more incentives to incinerate.
I pride myself in a small constituency way on having given a little push to this tax. I am glad to see Treasury Ministers, of all people, improving their environmental credentials by introducing the tax.
I have written to the Minister about the fact that my constituents in Pitstone and Ivinghoe are threatened by a massive landfill site that will badly damage local amenities in an area of outstanding natural beauty. I should be pleased to hear more details, as soon as my hon. Friend has them, about the Government's exact intentions in respect of the tax.
The last thing I want is that the tax should impede business in any way. I was interested to hear hon. Members raise objections in that regard. I was glad to hear the Minister imply that there might be some solution to those objections. I have in my hand a letter from Shell UK to the Minister for Industry and Energy about the Manchester ship canal. Those who, like me, have had a small hand in pushing this idea forward do not want to inhibit our industries in any way.
In any event, I congratulate the Minister on introducing the measure.

Mr. Malcolm Bruce: This is an important measure. It is interesting to note how widely the principle behind it is accepted as a desirable method of dealing with the problems. I agree with the hon. Member for Buckingham (Mr. Walden) that pressure on many sites in rural and suburban areas has become intense. To the extent that the tax will concentrate people's minds on finding other ways of disposing of waste, it must be highly desirable.
It is also true that the measure will pose difficulties for some industries. Some of the paper mills in my constituency produce inert waste that is not easily disposed of. Nevertheless, we all accept that the nettle must be grasped if we are to tackle these environmental problems.
Hon. Members have already mentioned the difficulties from the local authority point of view. There are also concerns as to how quickly they will be able to adjust. My hon. Friend the Member for Cheltenham (Mr. Jones) tells me that Gloucestershire county council reckons the measure will cost it £740,000 in the first year. Multiplied across the country, it becomes clear that local authorities, which are already squeezed, will face difficulties—although I am sure they will use their ingenuity to implement the measure.
I want to refer, secondly, to the point of principle in amendment No. 5. The Government, and all political parties that believe in environmental taxation, must make it clear to the public that measures such as these are not just another wheeze for getting money out of people, but represent a genuine desire to shift habits. The money that is raised should be repaid immediately in tax cuts

elsewhere. I am therefore slightly worried about the Government implementing the tax this year while making a great song about benefits that will not accrue until next year.
I might also point out that there will have been a general election in the interval, so the Government might not be in a position to deliver on their promise—leaving them exposed to the charge that they are more interested in introducing a tax than in providing the offsetting benefits.
That partly explains why my party voted against the Government's proposals to extend VAT to fuel, which was claimed afterwards to be an environmental move, but the revenue generated was used only to boost the Exchequer. An important matter of principle is at stake, and the Opposition amendment neatly encapsulated it. I suspect that that is why we shall vote together to ensure that our point is well made.

Ms Primarolo: The Government have not answered a number of points to do with clause 36, which deals with the charge to tax and the date for the national insurance contributions rebate. We debated the latter fully earlier this afternoon. Local authorities and landfill site operators will be greatly disadvantaged by the six-month delay that the Government have introduced—despite the undertakings given by the Chancellor in 1994 and 1995.
I want to make a few clear points about our objections, which are not to the existence of the tax but to the way in which the Government propose to implement it. It is crucial to encourage the development of alternative waste management options if we are to achieve the full potential of the tax.
We have heard about the Manchester ship canal and British Sugar, and my hon. Friend the Member for Great Grimsby (Mr. Mitchell) spoke about Tioxide UK, which will be penalised. Although that company takes highly toxic waste and puts it through an environmental process, recycling a great deal of it, there remains inert waste which it will have to pay to landfill. Presumably, one of its options is to put all its toxic waste into landfill and simply pay a slightly higher charge. It is vital that we have support systems in place to develop alternatives.
Despite the assurances that were given by the Paymaster General today—frankly, he is on a wing and a prayer—it is clear that he does not understand the cost of recycling or the investment that is necessary to introduce such processes. Changing people's behaviour is vital. He did not deal with the likely encouragement of disposal by less environmentally desirable options than landfill. He certainly did not say how we will ensure that fly tipping is not the by-product of the tax, which would defeat the very purpose of introducing it. He did not explain the interim measures that will ensure that waste producers are not able to avoid payment. He did not deal with current illegal sites, which will remain outside the landfill tax. Finally, he did not say how local authorities that are already under severe financial containment by the Government will be able to deal with new strategies to encourage recycling when they do not have the financial resources. The landfill tax will increase their costs for the disposal of waste.
For all those reasons, we shall vote against the clause and continue to press the Government to convert the landfill tax into a true environmental tax instead of a bit of window dressing.

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Mr. Heathcoat-Amory: The clause is an important element in the introduction of a landfill tax, about which we have consulted widely. I am grateful for the expressions of support for the principle of the tax from hon. Members on both sides of the House. It will encourage good environmental practice. By taxing landfill, we will encourage the development of alternative ways of dealing with waste. Indeed, it will lead to less waste being produced in the first place.
That justification for the tax is valid even if the landfill site is well engineered, as obviously is the case in the example described by the hon. Member for Wigan (Mr. Stott). My hon. Friend the Member for Buckingham (Mr. Walden) put the other side of the argument and showed that, even if a landfill site is well run and managed, there are still substantial nuisance problems to surrounding residents—smell, noise, litter, dust and traffic movements, for example. It is right, therefore, to try to capture those external costs and attribute them to the producers and handlers of waste.
The revenue raised from the tax will be some £450 million in a full year, and rather more than that—some £500 million in a full year—will be used to cut further the main rate of national insurance contributions to 10 per cent. The UK is leading the way in lightening the burden of employment taxation. That is one reason why our employment record is better than that of any other major economy in Europe.
Bafflingly, the Opposition now say that they will vote against the clause. Having supported the landfill tax, and having failed to indicate anything in the clause with which they disagree, they will, for reasons best known to themselves, vote against a key clause in bringing into effect the landfill tax. My right hon. and hon. Friends know better. I urge them and as many other hon. Members as possible to vote for the clause.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 283, Noes 260.

Division No. 32]
[7.05 pm


AYES


Ainsworth, Peter (East Surrey)
Bottomley, Peter (Eltham)


Aitken, Rt Hon Jonathan
Bottomley, Rt Hon Virginia


Alison, Rt Hon Michael (Selby)
Bowden, Sir Andrew


Allason, Rupert (Torbay)
Bowis, John


Amess, David
Boyson, Rt Hon Sir Rhodes


Arbuthnot, James
Brandreth, Gyles


Arnold, Jacques (Gravesham)
Brazier, Julian


Ashby, David
Bright, Sir Graham


Atkins, Rt Hon Robert
Brooke, Rt Hon Peter


Atkinson, Peter (Hexham)
Brown, M (Brigg & Cl'thorpes)


Baker, Rt Hon Kenneth (Mole V)
Browning, Mrs Angela


Baker, Nicholas (North Dorset)
Bruce, Ian (Dorset)


Baldry, Tony
Burns, Simon


Banks, Robert (Harrogate)
Burt, Alistair


Bates, Michael
Butcher, John


Batiste, Spencer
Butler, Peter


Bellingham, Henry
Butterfill, John


Bendall, Vivian
Carlisle, John (Luton North)


Beresford, Sir Paul
Carlisle, Sir Kenneth (Lincoln)


Biffen, Rt Hon John
Carrington, Matthew


Body, Sir Richard
Cash, William


Bonsor, Sir Nicholas
Chapman, Sir Sydney


Booth, Hartley
Churchill, Mr


Boswell, Tim
Clappison, James





Clark, Dr Michael (Rochford)
Heathcoat-Amory, Rt Hon David


Clarke, Rt Hon Kenneth (Ru'clif)
Hendry, Charles


Clifton-Brown, Geoffrey
Hicks, Robert


Coe, Sebastian
Higgins, Rt Hon Sir Terence


Colvin, Michael
Hogg, Rt Hon Douglas (G'tham)


Congdon, David
Horam, John


Conway, Derek
Hordern, Rt Hon Sir Peter


Coombs, Anthony (Wyre For'st)
Howard, Rt Hon Michael


Coombs, Simon (Swindon)
Howell, Rt Hon David (G'dford)


Couchman, James
Hughes, Robert G (Harrow W)


Cran, James
Hunt, Rt Hon David (Wirral W)


Currie, Mrs Edwina (S D'by'ire)
Hunter, Andrew


Curry, David (Skipton & Ripon)
Jack, Michael


Davies, Quentin (Stamford)
Jackson, Robert (Wantage)


Davis, David (Boothferry)
Jenkin, Bernard


Day, Stephen
Jessel, Toby


Deva, Nirj Joseph
Johnson Smith, Sir Geoffrey


Devlin, Tim
Jones, Gwilym (Cardiff N)


Dorrell, Rt Hon Stephen
Jones, Robert B (W Hertfdshr)


Douglas-Hamilton, Lord James
Jopling, Rt Hon Michael


Dover, Den
Kellett-Bowman, Dame Elaine


Duncan, Alan
Key, Robert


Duncan-Smith, Iain
King, Rt Hon Tom


Dunn, Bob
Kirkhope, Timothy


Durant, Sir Anthony
Knight, Mrs Angela (Erewash)


Dykes, Hugh
Knight, Rt Hon Greg (Derby N)


Eggar, Rt Hon Tim
Knight, Dame Jill (Bir'm E'st'n)


Elletson, Harold
Knox, Sir David


Emery, Rt Hon Sir Peter
Kynoch, George (Kincardine)


Evans, David (Welwyn Hatfield)
Lait, Mrs Jacqui


Evans, Jonathan (Brecon)
Lamont, Rt Hon Norman


Evans, Nigel (Ribble Valley)
Lawrence, Sir Ivan


Evans, Roger (Monmouth)
Legg, Barry


Evennett, David
Leigh, Edward


Faber, David
Lennox-Boyd, Sir Mark


Fabricant, Michael
Lester, Sir James (Broxtowe)


Field, Barry (Isle of Wight)
Lidington, David


Fishburn, Dudley
Lilley, Rt Hon Peter


Forman, Nigel
Lloyd, Rt Hon Sir Peter (Fareham)


Forsyth, Rt Hon Michael (Stirling)
Lord, Michael


Forth, Eric
Luff, Peter


Fowler, Rt Hon Sir Norman
Lyell, Rt Hon Sir Nicholas


Fox, Dr Liam (Woodspring)
MacKay, Andrew


Fox, Sir Marcus (Shipley)
Maclean, Rt Hon David


Freeman, Rt Hon Roger
McLoughlin, Patrick


French, Douglas
McNair-Wilson, Sir Patrick


Gale, Roger
Madel, Sir David


Gallie, Phil
Maitland, Lady Olga


Gardiner, Sir George
Major, Rt Hon John


Garel-Jones, Rt Hon Tristan
Malone, Gerald


Garnier, Edward
Mans, Keith


Gill, Christopher
Marlow, Tony


Gillan, Cheryl
Marshall, John (Hendon S)


Goodlad, Rt Hon Alastair
Marshall, Sir Michael (Arundel)


Goodson-Wickes, Dr Charles
Martin, David (Portsmouth S)


Gorman, Mrs Teresa
Mates, Michael


Gorst, Sir John
Mawhinney, Rt Hon Dr Brian


Grant, Sir A (SW Cambs)
Mayhew, Rt Hon Sir Patrick


Greenway, Harry (Ealing N)
Mellor, Rt Hon David


Greenway, John (Ryedale)
Merchant, Piers


Griffiths, Peter (Portsmouth, N)
Mitchell, Andrew (Gedling)


Grylls, Sir Michael
Mitchell, Sir David (NW Hants)


Gummer, Rt Hon John Selwyn
Moate, Sir Roger


Hague, Rt Hon William
Monro, Rt Hon Sir Hector


Hamilton, Rt Han Sir Archibald
Montgomery, Sir Fergus


Hamilton, Neil (Tatton)
Needham, Rt Hon Richard


Hampson, Dr Keith
Neubert, Sir Michael


Hanley, Rt Hon Jeremy
Newton, Rt Hon Tony


Hannam, Sir John
Nicholls, Patrick


Hargreaves, Andrew
Nicholson, David (Taunton)


Harris, David
Norris, Steve


Hawkins, Nick
Onslow, Rt Hon Sir Cranley


Hawksley, Warren
Oppenheim, Phillip


Hayes, Jerry
Ottaway, Richard



Heald, Oliver
Page, Richard


Heath, Rt Hon Sir Edward
Paice, James






Patten, Rt Hon John
Sweeney, Walter


Pattie, Rt Hon Sir Geoffrey
Sykes, John


Pawsey, James
Tapsell, Sir Peter


Peacock, Mrs Elizabeth
Taylor, Ian (Esher)


Porter, Barry (Wirral S)
Taylor, John M (Solihull)


Porter, David (Waveney)
Taylor, Sir Teddy (Southend, E)


Powell, William (Corby)
Temple-Morris, Peter


Redwood, Rt Hon John
Thomason, Roy


Renton, Rt Hon Tim
Thompson, Sir Donald (C'er V)


Richards, Rod
Thompson, Patrick (Norwich N)


Riddick, Graham
Thornton, Sir Malcolm


Rifkind, Rt Hon Malcolm
Thurnham, Peter


Robathan, Andrew
Townsend, Cyril D (Bexl'yh'th)


Roberts, Rt Hon Sir Wyn
Tracey, Richard


Robertson, Raymond (Ab'd'n S)
Tredinnick, David


Robinson, Mark (Somerton)
Trend, Michael


Roe, Mrs Marion (Broxbourne)
Trotter, Neville


Rowe, Andrew (Mid Kent)
Twinn, Dr Ian


Rumbold, Rt Hon Dame Angela
Vaughan, Sir Gerard


Sackville, Tom
Viggers, Peter


Sainsbury, Rt Hon Sir Timothy
Waldegrave, Rt Hon William


Scott, Rt Hon Sir Nicholas
Walden, George


Shephard, Rt Hon Gillian
Walker, Bill (N Tayside)


Shepherd, Richard (Aldridge)
Waller, Gary


Shersby, Sir Michael
Ward, John


Sims, Roger
Wardle, Charles (Bexhill)


Skeet, Sir Trevor
Waterson, Nigel


Smith, Tim (Beaconsfield)
Watts, John


Soames, Nicholas
Wells, Bowen


Spencer, Sir Derek
Whitney, Ray


Spicer, Sir James (W Dorset)
Whittingdale, John


Spicer, Sir Michael (S Worcs)
Widdecombe, Ann


Spink, Dr Robert
Wiggin, Sir Jerry


Spring, Richard
Wilkinson, John


Sproat, Iain
Willetts, David


Squire, Robin (Hornchurch)
Wilshire, David


Stanley, Rt Hon Sir John
Winterton, Mrs Ann (Congleton)


Steen, Anthony
Winterton, Nicholas (Macc'f'ld)


Stephen, Michael
Yeo, Tim


Stern, Michael
Young, Rt Hon Sir George


Stewart, Allan
Tellers for the Ayes:


Streeter, Gary
Mr. Roger Knapman and


Sumberg, David
Mr. Timothy Wood.


NOES


Abbott, Ms Diane
Byers, Stephen


Adams, Mrs Irene
Caborn, Richard


Ainger, Nick
Callaghan, Jim


Ainsworth, Robert (Cov'try NE)
Campbell, Mrs Anne (C'bridge)


Allen, Graham
Campbell, Menzies (Fife NE)


Alton, David
Campbell, Ronnie (Blyth V)


Anderson, Donald (Swansea E)
Campbell-Savours, D N


Anderson, Ms Janet (Ros'dale)
Canavan, Dennis


Armstrong, Hilary
Cann, Jamie


Ashdown, Rt Hon Paddy
Chisholm, Malcolm


Ashton, Joe
Clapham, Michael


Austin-Walker, John
Clark, Dr David (South Shields)


Banks, Tony (Newham NW)
Clarke, Eric (Midlothian)


Barnes, Harry
Clarke, Tom (Monklands W)


Battle, John
Clelland, David


Beckett, Rt Hon Margaret
Clwyd, Mrs Ann


Bell, Stuart
Coffey, Ann


Benn, Rt Hon Tony
Cohen, Harry


Bennett, Andrew F
Connarty, Michael


Benton, Joe
Cook, Frank (Stockton N)


Bermingham, Gerald
Cook, Robin (Livingston)


Berry, Roger
Corbett, Robin


Betts, Clive
Corston, Jean


Blair, Rt Hon Tony
Cousins, Jim


Boateng, Paul
Cunningham, Jim (Covy SE)


Bradley, Keith
Cunningham, Rt Hon Dr John


Brown, Gordon (Dunfermline E)
Cunningham, Roseanna


Brown, N (N'c'tle upon Tyne E)
Dafis, Cynog


Bruce, Malcolm (Gordon)
Dalyell, Tam


Burden, Richard
Darling, Alistair





Davidson, Ian
Litherland, Robert


Davies, Bryan (Oldham C'tral) 
Livingstone, Ken


Davies, Chris (L'Boro & S'worth)
Llwyd, Elfyn


Davies, Rt Hon Denzil (Llanelli)
Loyden, Eddie


Davies, Ron (Caerphilly)
Lynne, Ms Liz


Denham, John
McAllion, John


Dewar, Donald
McAvoy, Thomas


Dixon, Don
McCartney, Ian


Dobson, Frank
McCrea, The Reverend William


Dowd, Jim
McFall, John


Eagle, Ms Angela
McKelvey, William


Eastham, Ken
McLeish, Henry


Etherington, Bill
Maclennan, Robert


Evans, John (St Helens N)
McMaster, Gordon


Ewing, Mrs Margaret
McNamara, Kevin


Fatchett, Derek
MacShane, Denis


Faulds, Andrew
McWilliam, John


Field, Frank (Birkenhead)
Madden, Max


Flynn, Paul
Mahon, Alice


Foster, Rt Hon Derek
Mandelson, Peter


Foster, Don (Bath)
Marek, Dr John


Foulkes, George
Marshall, David (Shettleston)


Fyfe, Maria
Martin, Michael J (Springbum)


Galbraith, Sam
Maxton, John


Galloway, George
Meacher, Michael


Gapes, Mike
Meale, Alan


Garrett, John
Michael, Alun


George, Bruce
Michie, Bill (Sheffield Heeley)


Gerrard, Neil
Michie, Mrs Ray (Argyll & Bute)


Gilbert, Rt Hon Dr John
Milburn, Alan


Godman, Dr Norman A
Miller, Andrew


Godsiff, Roger
Mitchell, Austin (Gt Grimsby)


Golding, Mrs Lin
Molyneaux, Rt Hon Sir James


Gordon, Mildred
Moonie, Dr Lewis


Graham, Thomas
Morgan, Rhodri


Grant, Bernie (Tottenham)
Morley, Elliot


Griffiths, Nigel (Edinburgh S)
Morris, Rt Hon Alfred (Wy'nshawe)


Griffiths, Win (Bridgend)
Morris, Estelle (B'ham Yardley)


Grocott, Bruce
Morris, Rt Hon John (Aberavon)


Gunnell, John
Mowlam, Marjorie


Hain, Peter
Mudie, George


Hall, Mike
Mullin, Chris


Hanson, David
Murphy, Paul


Harvey, Nick
Oakes, Rt Hon Gordon


Henderson, Doug
O'Brien, Mike (N W'kshire)


Heppell, John
O'Brien, William (Normanton)


Hinchliffe, David
O'Hara, Edward


Hodge, Margaret
Olner, Bill


Hoey, Kate
O'Neill, Martin


Home Robertson, John
Orme, Rt Hon Stanley


Hood, Jimmy
Parry, Robert


Hoon, Geoffrey
Pearson, Ian


Howarth, Alan (Strat'rd-on-A)
Pendry, Tom


Howarth, George (Knowsley North)
Pickthall, Colin


Howells, Dr Kim (Pontypridd)
Pike, Peter L


Hoyle, Doug
Pope, Greg


Hughes, Robert (Aberdeen N)
Powell, Ray (Ogmore)


Hughes, Simon (Southwark)
Prentice, Bridget (Lew'm E)


Hutton, John
Prentice, Gordon (Pendle)


Illsley, Eric
Prescott Rt Hon John


Ingram, Adam
Primarolo, Dawn


Jackson, Glenda (H'stead)
Purchase, Ken


Jackson, Helen (Shef'ld, H)
Quin, Ms Joyce


Jamieson, David
Randall, Stuart


Jones, Barry (Alyn and D'side)
Raynsford, Nick


Jones, Lynne (B'ham S O)
Reid, Dr John


Jones, Martyn (Clwyd, SW)
Rendel, David


Jones, Nigel (Cheltenham)
Robertson, George (Hamilton)


Kaufman, Rt Hon Gerald
Robinson, Geoffrey (Co'try NW)


Keen, Alan
Roche, Mrs Barbara


Kennedy, Jane (L'pool Br'dg'n)
Rogers, Allan


Khabra, Piara S
Rocker, Jeff


Kilfoyle, Peter
Ross, Ernie (Dundee W)


Kirkwood, Archy
Rowlands, Ted


Lestor, Joan (Eccles)
Ruddock, Joan


Liddell, Mrs Helen
Salmond, Alex






Sedgemore, Brian
Touhig, Don


Sheerman, Barry
Trimble, David


Sheldon, Rt Hon Robert
Turner, Dennis


Shore, Rt Hon Peter
Tyler, Paul


Short, Clare
Vaz, Keith


Simpson, Alan
Walker, Rt Hon Sir Harold


Skinner, Dennis
Wallace, James


Smith, Andrew (Oxford E)
Walley, Joan


Smith, Chris (lsl'ton S & F'sbury)
Wardell, Gareth (Gower)


Smith, Llew (Blaenau Gwent)
Wareing, Robert N


Smyth, The Reverend Martin
Watson, Mike


Snape, Peter
Welsh, Andrew


Soley, Clive
Wicks, Malcolm


Spearing, Nigel
Wigley, Dafydd


Speller, John
Williams, Rt Hon Alan (SW'n W)


Squire, Rachel (Dunfermline W)
Williams, Alan W (Carmarthen)


Steel, Rt Hon Sir David
Wilson, Brian


Steinberg, Gerry
Winnick, David


Stevenson, George
Wise, Audrey


Stott, Roger
Worthington, Tony


Strang, Dr. Gavin
Wright, Dr Tony


Straw, Jack
Young, David (Bolton SE)


Taylor, Mrs Ann (Dewsbury)
Tellers for the Noes:


Timms, Stephen
Mr. Jon Owen Jones and


Tipping, Paddy
Mr. Eric Martlew.

Question accordingly agreed to.

Clause 36 ordered to stand part of the Bill.

Rev. Martin Smyth: On a point of order, Mr. Lofthouse. Have Northern Ireland Office Ministers asked you to adjourn the Committee so that a statement can be made about the closure of Fokkers, and the impact of that closure on Shorts? Some 1,500 jobs could be threatened.

The First Deputy Chairman of Ways and Means (Sir Geoffrey Lofthouse): I have received no such request.

Clause 105

REQUIREMENTS TO BE SATISFIED BY APPROVED SCHEMES

Mr. Alistair Darling: I beg to move amendment No. 7, in page 69, line 37, leave out
'subsections (2) and (3) below'
and insert
'subsections (1A), (2) and (3) below'.

The First Deputy Chairman: With this, it will be convenient to discuss also amendment No. 6, in page 69, line 38, at end insert—
'(1A) After paragraph 27 there shall be inserted the following paragraph—
27A(1) Subject to paragraph 8 above, the following shall apply:

(a) Every person eligible to participate in the scheme must be able to do so on similar terms;
(b) Every person who meets the following conditions must be eligible to participate;

(i) The person must be an employee or a director of the company, or in the case of group scheme, of a participating company, and
(ii) The person must be chargeable to tax in respect of his office or employment under Case 1 of Schedule E.




(2) For the purposes of sub-paragraph (1) above the following shall apply;


(a) A person participating in a scheme is a person who obtains and exercises rights under the rules of the scheme.
(b) The fact that the rights obtained and exercised by a person participating in the scheme vary according to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that they are not eligible to participate in the scheme on similar terms.".'.

Mr. Darling: Amendment No. 7 is a drafting amendment: it is necessary for the incorporation of amendment No. 6.
The purpose of clause 105 is to allow the Government to implement their new company share option plans, which we broadly welcome. The plans replace the existing share option schemes introduced in the mid-1980s. The new relief involves two essential conditions. The first is the placing of a £20,000 limit on the value of shares that may be held by an employee at any one time. Secondly—perhaps I could attract the Financial Secretary's attention for a moment as I wish to press him on this—the options must be granted at an exercise price
not manifestly less than the market value
of the shares at the date of grant. In other words, they must not be granted at a discount, which contrasts with the present position. That second condition appears in clause 105(3).
It would help both the Committee and those who will have to interpret the provision if the Financial Secretary would tell us exactly what "manifestly" means in this context, and what measure we are to apply to it. "Manifestly less" clearly implies more than "slightly less" or "marginally less". Paragraph 29 of schedule 9 of the present scheme provides for a discount of up to 15 per cent. It might be useful if, speaking in percentage or similar terms, the Financial Secretary could tell us whether "manifestly less" means less than 15 per cent. Presumably it does; otherwise, the Government's argument that they are restricting the scope for discount would fall apart.
I assume that that point will need to be the subject of a guidance note from the Inland Revenue. Otherwise, it will be left to the interpretation of the courts. That is very unsatisfactory. Companies will want to get new schemes under way fairly early, but they might have to wait two to five years, if not longer, for a judicial interpretation. When I saw the words "not manifestly less", it occurred to me that the Government might be saying that they were going to close a door while using a form of words which would result in that door being left as wide open as it is now.
Before I come to the central issue, I should like the Financial Secretary to deal with a point which arises in the Inland Revenue notes on clauses circulated to members of the Committee. It relates to the old discount of up to 15 per cent. Those who have read the notes, and those who are familiar with the legislation, will know that that discount was available if the company scheme was available to all employees, but if the company subsequently restricted share availability to certain employees, the discount could still be applied.
Two questions arise from that. First, am I correct in assuming that, along with the 15 per cent. discount, all those arrangements will go? Secondly—here I return to my point about the phrase "manifestly less"—are we to understand that some variability is involved? The position is extremely uncertain.
Lest the Committee think that I am spending undue time on what might be considered a comparatively small point, let me add that it is necessary to examine the Government's track record on share option schemes to understand our concern. We were told in the Budget statement that the Chancellor wanted to end abuses of the present scheme, as we have pressed the Government to do for many months. Far from closing an avenue for abuse, however, it seems that such an avenue is being opened. Given that many people have ruthlessly exploited and, I believe, abused the present scheme, it would be wrong for us to allow further opportunities for such exploitation and abuse.
I have raised that issue at the outset because the Financial Secretary's reply will influence our judgment of what the Government have to say about the rest of the legislation. The Government have said that they do not just want to simplify legislation; they want clarity as well. If one is interested in clarity, one should avoid putting into legislation words that are open to 57 different interpretations. The Financial Secretary seems to agree with the spirit of what I have said, as he is nodding vigorously, although he may be doing that simply to pass the time.
Amendment No. 6 is designed to ensure that the new company share option schemes are open to all employees, from the board room to the shop floor. That is essential if we are to encourage workers to have a stake in the company that employs them. Everyone must be motivated and feel that they are part of the enterprise in which they are employed. All the evidence suggests that companies have recognised the essential truth that the employees who are motivated and intimately involved with their place of work are the ones who will succeed, while those who insist on relying on the old "them and us" approach to industry are likely to fail.
I have referred to the notes issued by the Inland Revenue in regard to the end of the present discount. I am relying on the information contained there that the discount was available only where there was an all-employee share ownership scheme on offer and that that apparently is to end. The assumption that I and, I believe, many people therefore make is that the new company share option scheme need not be offered to all employees at the workplace. For the reasons that I have stated, it is essential that it should be.
7.30 pm
I have been told on numerous occasions that people in senior management and in the boardroom need to receive incentives to make them perform. I am usually told that by the same boardroom members who stand to benefit from these schemes, but I have always believed that, if incentives are good for some people, they are probably good for everyone, and that it is good if people think that by working hard and doing something different—a restructuring in a company, perhaps—they, too, stand to gain. Hon. Members should encourage that.
Mr. Lofthouse, the history of this matter is relevant to the debate. It entitles us to consider the Government's proposals with a degree of scepticism, although everyone is entitled to take a different view and to change their mind, as the Government did after vehemently opposing

any idea that the existing share option scheme was being abused, especially by people in the boardrooms of the privatised utilities. The Prime Minister had a sudden change of heart, which took many of his colleagues by surprise. When one considers the abuses that have taken place, especially by people who sit on the boards of the privatised utilities, we are entitled to ask whether the Government have indeed changed their mind and ensured that such abuses will end.
It upset many people that the same people, doing the same job, received hugely increased salaries only a few weeks after their enterprise had been privatised. They saw those individuals being granted huge amounts of share options. Share prices increased in the privatised utilities, not because of improved performance by people in the boardroom, but because of the way in which those utilities were privatised. Bluntly, they were sold off at knock-down prices. It would have been difficult for anyone appointed to the boardroom of a privatised utility not to receive a substantial windfall gain, not because of anything they did, but as a result of sheer chance.
Those people did not stop there. Many of them, using current tax laws, as they are entitled to do, ensured that their wives also benefited indirectly from the scheme. That is grossly unfair, when most people have had to face 21 different tax rises since 1992. The burden of taxation for most people has increased. It seemed that there was no limit to the greed of some members of the privatised utilities. As I have said, the Government and the Prime Minister in particular did absolutely nothing until the pressure on them became so great that they had to go along with the Confederation of British Industry's decision to set up the Greenbury committee.
It has always seemed to me, Mr. Lofthouse, that, in relation to the privatised utilities and sell-offs, the Government were never really bothered about Sid, but were far more bothered about looking after Cedric, which is exactly what the Government did. It was only after pressure that they forced to set up the Greenbury committee.
Clause 105 resulted from the Chancellor of the Exchequer's reaction to the Greenbury report. It was, as ever, a bungled reaction. On 17 July, the Government announced that they were going to shut down executive share option schemes immediately, but 10 days later the Chancellor had to change his mind as he realised that, in addition to shutting down schemes that many of us would criticise, he was also shutting down schemes that had been used to benefit a majority of employees, which the Government may not have intended.
At Asda, for example, the executive share option scheme was used to benefit most of the work force. Of course, if the Chancellor's original announcement had been implemented, those people, who were wholly innocent and were simply taking advantage of a scheme that they had been offered—certainly it was small-scale stuff—would have been hit, so the Chancellor had to change his mind.
I assume that the clause was introduced by the Government in an effort at least to get rid of some of the abuses that Greenbury had identified. If that ending of abuses is to proceed hand in hand with a genuine move to extend opportunities to acquire shares in an enterprise, however, amendments Nos. 7 and 6 must be accepted by the Government. Otherwise, options will be offered only


to a small class of people—probably those sitting in the boardrooms, whose behaviour has so incensed people, not just in the House, but throughout the country.
The amendment provides that the option under clause 105 must be made available to all people who are employed in an enterprise and on similar terms—not identical terms, because that is clearly inappropriate. That would ensure that people would see that they too had an opportunity to benefit from whatever option schemes were available in the company. They too would know that any success in the company would be shared. On this point, it is important that all schemes should ensure that there is reward after success, rather than reward in anticipation of success, which is where British Gas went badly wrong.
Despite our amendment and clause 105, the abuses in the system will continue and are continuing, not only because powerful voices are determined to block the full implementation of Greenbury, but because—unless the Financial Secretary tells us that we are wrong—the present schemes will continue to operate as unapproved rather than approved schemes. If a company wants to fund a scheme, it can do so. If the Financial Secretary can tell us that we are wrong on that, it will be interesting to hear what he says. Unapproved schemes will be able to continue. In a private company, that does not matter—that is its concern—but in the privatised utilities, it does matter. Concerns will remain about that.
Mr. Lofthouse, we are dealing here with one clause. When the Committee sits upstairs, we shall have an opportunity to consider other aspects of the Government's reform—profit-related pay, and so on. This clause, however, implements the new company share option plan, which most people would broadly welcome, but only if it is a genuine attempt to expand share ownership and participation to the whole work force. In many companies, the opportunity will be taken to offer schemes across the board because many employers are keen to do that. I am concerned, however, that unless this amendment is accepted the people who took part in the abuses that the public, Labour Members and perhaps a smattering of Conservative Members want to stop, will drive a coach and horses through any attempt to reform the system.
Sir Geoffrey, I have just realised that I have been guilty of a great insult to you for the past 20 minutes: I have overlooked the fact that you are now Sir Geoffrey rather than Mr. Lofthouse. I hope that that is why you were glaring at me, and not because I was straying out of order. Having apologised so fulsomely, I trust that you will not mind if I do stray, although I will do my best not to.
It is important that we have a new culture in this country and encourage companies genuinely to involve the work force in the enterprise. There are some encouraging signs in many regions, where companies are ensuring that their employees receive genuine share ownership. As I said, I should like those options to be open to everyone from the boardroom to the shop floor. That is what our amendment would achieve.
I hope that making shares available to more employees will encourage a long-term outlook within a company and therefore a long-term culture, which is something that far too many companies do not have. If that encourages savings, in addition to a pensions scheme and other savings options, it should be welcomed. Shares should reward success, but we must ensure that the success comes before the reward. We should avoid the problems

that have bedevilled parts of British industry where the reward has been paid willy-nilly and has had nothing to do with success.
I hope that the Government will accept the amendment. If they do not, that will show people that yet again the Government are concerned with the few in the boardroom and not the many who work in British industry. It will be a touchstone of where the Government stand on the wider case for spreading share ownership to as many people as possible. We believe that it is important to involve people and to change the culture of British industry because that is where future success will lie.
If the amendment is technically deficient, I am sure that the civil service or the newly privatised draftsmen will be able to produce something better for us. However, if the Government object to the amendment in principle, many people following these proceedings and listening to what the Government have to say will reach the view that although the Government say that they want to end the abuses, in fact they are just continuing them under another name.
I hope that at the end of the debate the majority in the House will see the merit of ensuring that share ownership schemes are spread to as many people as possible, so that there is genuine participation. We must stop the abuses which benefit a tiny, greedy minority.

Mrs. Helen Jackson: I hope that the Government accept the amendment, which would widen the meaning of the clause. It is a genuine attempt to be helpful. My hon. Friend the Member for Edinburgh, Central (Mr. Darling) might even have said that the Labour party believes that all those working in an enterprise should have a stake in it. That is important throughout industry. We support employee share ownership in all sectors and commend those where such schemes have been developed.
The Central Statistical Office share register survey at the end of 1992 clearly shows that, although individuals held about 20 per cent. of all shares—80 per cent. are held by large institutional shareholders—the figure for shares in privatised utilities was 24 per cent. At the time it was said that, after all the publicity given to privatisations, it was surprising that the differential between the two was only 4 per cent. Nevertheless, 4 per cent. represents about 7 million shareholders.
A National Opinion Poll survey the following year of individual shareholdings in privatised utilities—including those held by lower-grade employees in those utilities—showed a number of token holdings of just one or two shares. However, those token shareholdings gave those employees a stake in their company and allowed them to say their bit at the annual general meeting, which is important. In fact, only a quarter of individual shareholders in the utilities held more than a token number of shares.
7.45 pm
I stress that it is not just the major shareholders who need to be encouraged to take a full interest in an enterprise, especially in the privatised utilities. With public service utilities such as the water industry, it is important that all those involved in the business feel that they are playing their part in delivering a quality service to the public. Employees and members of the public are


entitled to hold token shareholdings, and that should be welcomed. The Opposition recognise that shareholding is not simply about money-making; it is about someone participating in the enterprise where he works.
There has been a significant increase in individual shareholders in Yorkshire following the water problems in the summer. People saw it as a means to enable them to make their point about what happened. We support any Government measures to increase shareholding and to limit the excesses of industry's fat cats and the executives of the privatised utilities. However, it is still not clear that the Government really want to extend the rights and responsibilities of individual shareholders in those companies.
I draw the Government's attention to a recent example of where their intentions might have seemed to be good, but in reality they were not interested in listening to individual shareholders. A major public inquiry held on 14 November was attended by individual shareholders, many of them employee shareholders, in Yorkshire Water. The inquiry lasted three days. It is only tonight that the report of that inquiry has been published, even though it was on the desk of the Secretary of State for the Environment on 23 November.
Individual, including employee, shareholders in Yorkshire Water were concerned about the running of their enterprise. The Government need to ask themselves whether they are hypocritical—a word already used tonight—because they obviously did not recognise those shareholders as important people in that company. They refused to recognise their real concerns, even though they gave evidence to the inquiry over three days. That is unforgivable.
While the Minister is not responsible for that matter, I am sure that he will take note of this as a good get-out clause. The report went out with a covering letter, in which one must be aware of the double negatives. The letter states:
If the Secretary of State had not decided, in the light of Yorkshire Water's request, to defer taking a decision on the application and the report, it would have been necessary to address the many points raised in that report. Since the applications have now been withdrawn, it would now serve no useful purpose to go further into those questions.
It is disgraceful and arrogant to say to the employees and shareholders in Yorkshire Water who spent three days in Dewsbury giving their evidence that that evidence is not even worthy of consideration. In order to rescue the Government from such hypocrisy, I am sure that the Minister will be keen to accept the amendment. The Government will then make it clear that the measures that they want to put in the Bill will benefit all employees and all shareholders, whatever their position in a company. I look forward to the Minister's response.

The First Deputy Chairman: I call Mr. Quentin Davies.

Mr. Quentin Davies: Thank you, Sir Geoffrey—it is a great pleasure to use those last two words.
I have listened with great interest to the hon. Members for Sheffield, Hillsborough (Mrs. Jackson) and for Edinburgh, Central (Mr. Darling). There is no doubt that,

at first sight, the notion of all share options schemes being automatically available on the same terms to all employees is attractive and appealing. All employees like to feel that they are part of a firm and that they are committed to that firm's success, and such morale is essential if a company is to be successful. But I fear that that appeal—while very obvious—is a little superficial.
Once again, Labour has not thought through what the consequences would be of implementing a populist policy—in this case, a policy using taxation to achieve certain political purposes relating to the way that industry is run. It is clear that, if share options are ultimately exercised, the existing shareholders will be diluted. In a sense, the whole object of the scheme is that employees and directors who benefit from share option schemes will share in the profits, all of which would otherwise be attributable to the shareholders alone.
It may be in the interests of the shareholders to make sure that those who contribute specifically to increasing the share price—thereby increasing the value available to the shareholders—do share in that benefit. It is therefore essential that there should be an element of selectivity in the application of the schemes, which are not appropriate as a firm-wide or universal way of remunerating employees. There are many other ways of doing that, including tax-efficient ways provided for by the Government, such as the company employees share scheme, which has been in operation for 10 years or more.
When one gives employees an option, by definition one is giving them an incentive to increase the value of the shares of the company concerned. The shareholders are saying that they believe that the employees have it in them to make a real contribution. If they increase the value of the shares, the shareholders will give them some benefit or allow them to share in the equity interests of the firm. Such an incentive must be selected and targeted on those employees or directors who are in a position to contribute directly in that way.
While in some cases it would be quite right to have several different schemes with different rules and amounts for the options in the same company, it would be inappropriate to have share options as a universal scheme. The amendment does not make much sense in terms of achieving the management and motivating objectives of a good share option scheme.

Mr. Darling: The hon. Member is falling into the old ways of the Conservative party, which hold that the only people who need incentives and to be encouraged and handed out largesse are those at the top, while those at the bottom do not really matter. While it is okay to hand baubles to those at the bottom, it is only those at the top who need tax breaks and other such benefits.
Does the hon. Gentleman accept that the amendment specifies that schemes have to be made available on similar—not identical—terms? The amendment would make sure that, if the tax system is to be used—in other words, if taxpayers' money in terms of tax forgone is to be used—the maximum number of people should benefit. If company shareholders want to provide benefit to certain individuals over and above that, there is nothing to stop them from doing so, but not through a system subsidised by the taxpayer.

Mr. Davies: The object of a share option scheme is not that the maximum number of people should benefit but


that the maximum benefit should be achieved for the shareholders of a company by those who are being asked for their share equity interest. The hon. Gentleman may find some difficulty in following that distinction, but it is a real one. If he had any experience of running a company, I am sure that he would accept it.
The hon. Member for Edinburgh, Central used the word "top"—no doubt demagogically. I was not suggesting at all that only the top people or top management should benefit from a share option scheme. Far from it. In many cases, a quite disproportionate contribution to the success of an enterprise can be made by someone who is not particularly highly ranked in the hierarchy of a company. For example, someone employed in a research-based or hi-tech company might make a fundamental contribution to the future prosperity of that enterprise by inventing a new product or substantially improving an existing one. Perhaps an employee may find some new technique of manufacturing.
Such people have made a quite exceptional contribution, and it is right that there should be a mechanism available to reward them proportionately. It would not make sense to extend that benefit to every other employee in the company. The same applies to a salesman, who may be quite junior in the hierarchy of a company but who may produce a major contract that may have an enormous impact on the company's prosperity, on the value created for shareholders and—in a case such as that—on the job security of all of his fellow employees.
The hon. Gentleman has introduced an extraneous element—a total red herring. He may have done so to try to throw sand in the eyes of Conservative Members, but he must know us well enough to know that that would not succeed. He may, on the other hand, be genuinely confused about the matter, in which case I hope that the debate will give him an opportunity to reflect on it.

Mr. Malcolm Bruce: I have been listening carefully to the hon. Member. Does he acknowledge that the wording of the amendment takes care of his argument? The hon. Gentleman suggests that, because people have different levels of remuneration, we need a mechanism that provides them with the ability to take greater benefits and share options according to earnings or seniority. That matter seems to be built into the amendment. Is not a lot of what the hon. Gentleman says already accounted for? Does he accept that the motivation behind the measure is the degree of public anger at the totally disproportionate amounts of share option benefits that have been given to top management out of all proportion to any reasonable incentive, while people further down in companies are being shut out altogether?

Mr. Davies: The hon. Member makes two points, which I shall deal with in reverse order. My right hon. and learned Friend the Chancellor of the Exchequer very much accepts the point that the hon. Gentleman makes about the general public outcry at the excessive benefits achieved through share option schemes. In fact, he accepted it some six months or more ago. That is exactly why clause 105 is in the Bill, and why we now have the £20,000 or £30,000 limitation.
On the hon. Gentleman's first comment, I am afraid that he rather forces me to repeat some of what I have already said. My point was precisely that it was not right that share options should necessarily be allocated in proportion to the salary levels of those who benefit from

them. Still less would it be right that one should qualify only because one has a high salary or wage. On the contrary, I am saying that it is important that those schemes be so structured that they provide benefits for those who make a disproportionately large individual contribution to the firm—by definition, therefore, a compulsory universality.
The Labour party always likes to think in terms of compulsion. Everything has to be compulsory and imposed from on high by the Government—one cannot leave companies to run themselves and determine how they run the schemes because Government or civil servants know better. That is the old, old Labour party, and it does not change. That has come through just as strongly in this debate as in so many different contexts in the House.

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Mr. Darling: Does it strike the hon. Gentleman as curious that he is happy to support a Government who impose tax increases on most people, but at the same time support the tax breaks that he wants to focus on the very few? If a tax system is going to be used, it should benefit everyone in the work force. If companies want to give people incentives over and above that, there is nothing in this world to stop them from doing so, but they are not going to be able to receive their current tax break. Is not what we are hearing tonight that the Tory party is up to its old tricks? It is more concerned with Cedric and does not care much about the Sids of the work force.

Mr. Davies: The hon. Gentleman obviously has not read clause 105, on which his amendment is based, if he thinks that no one cares about the Sids, because the point of the clause is to deal with precisely that point. I am gratified at the way in which the discussion is moving. The hon. Gentleman started off by proposing a certain regime for share options; I criticised it; and, far from tackling my criticism, he has shifted the argument on to the general matter of whether I am in favour of a Government who have greatly increased taxation and so forth. He knows my response to that perfectly well, but I should think, Sir Geoffrey, that you would not want me to deliver it this evening.
I do not intend to be thrown off my stride. Another important point arose from the speech by the hon. Member for Edinburgh, Central, and it would be a great mistake to let the debate go by without drawing the attention of the Committee to it. At the outset of the debate on this amendment, perhaps reluctantly or inadvertently—it was in the nature of a Freudian slip—he said that he was concerned that the Government have not taken into account the possibility of firms coming up with an unauthorised scheme that could be very different from the sort to which the tax benefits foreseen in this paragraph have now been more narrowly directed.
He contradicted that in his subsequent intervention on my remarks, when he said that there is no reason why companies should not do that. He then caught himself. He obviously thought that new Labour should not be in the business of saying that companies cannot do what they like with their own money, even when there is no tax implication. He said, "But, of course, for the private companies"—I think I am quoting him accurately; but Hansard will confirm this—"that might be all right. But for the newly privatised companies, that would not be all right at all."
The hon. Member for Edinburgh, Central—this is characteristic of Labour party thinking, and it has come out well in this debate—is trying to distinguish between private sector companies in general and those private sector companies that were once nationalised. That is an extremely damaging road to go down for a sector of British industry that now has a worldwide reputation.
The great success of our privatisation programme has not merely been the creation of a new class of small shareholders, but that we have achieved efficiency and productivity gains and turned loss-making nationalised industries into profit-making privatised ones, from which the Exchequer has gained a considerable revenue stream. Those are all enormously important, but there has also been a major development in the structure of British industry. We now have a number of major multi-nationals of global importance in their sectors—some are leaders in their sectors, for example, British Airways, British Telecom, British Steel and British Gas.
The consequence of the thinking of the hon. Member for Edinburgh, Central, if ever it were allowed to influence policy formation in this country, would be to stymie those companies—those great success stories—with a regime that is different from that of the rest—

Mr. Darling: Will the hon. Gentleman give way?

Mr. Davies: I have given way a great deal to the hon. Gentleman. I hope that he will forgive me for not doing so at the moment. I am sure that he will be able to catch your eye again, Sir Geoffrey, if he feels that he needs to do so.
As a result, it would be extremely difficult for those companies to compete equally with other private sector companies. On executive or directors' share options and the tax treatment of directors or employees of those companies generally, one can envisage exactly what such a differential regime would lead to. Able and successful executives in the newly privatised companies—not so newly privatised in some cases, but almost all extremely successful, with some major multinationals—would be poached by rival companies which could offer more attractive executive share options. It would be a one-way street. No one would want to go from the rest of the private sector into the privatised sector, and that would handicap extremely successful companies—the generators of a great deal of national wealth and employment—with a burden that was unjustified in economic theory, or more importantly, in pure equity, fair play and justice.
I am sorry to have seen that tendency revealed—we all know that it is there—in such a stark and slightly shocking way in that intervention from the hon. Member for Edinburgh, Central. Perhaps it was a slightly involuntary remark.

Mr. Darling: The hon. Gentleman says that it is only the Opposition who distinguish between the privatised utilities and the generality of private industries. Does he not accept that the public make a distinction in what they regard as unacceptable behaviour in the privatised utilities—not all private companies—and so do the Government, because they regulate those utilities? So everyone except for the hon. Gentleman distinguishes between the privatised utilities and other industries in general.

Mr. Davies: I do not think that that distinction stands. There is indeed a necessity to regulate natural monopolies, but as we have discovered—we have been path-breakers in the area of privatisation and it is not surprising that the world has come to our door to see how we have done it—many sectors of activity within the utilities are not natural monopolies. Competition can be and is being generated there—competition that could not have been foreseen 10 or more years ago.
One thinks of the great competition within the telecoms sector, first from Mercury and now from the cable companies. One thinks of the tremendous competition that has come into electricity generation and distribution, and gas extraction and distribution. Only the pipeline, the intermediate part of the gas industry, is in any sense a natural monopoly. Similarly, we have found that it is feasible to generate genuine competition in the running of trains. The natural monopoly that may need to be regulated is the ownership of the track. The distinction drawn by the hon. Member for Edinburgh, Central is naive and perhaps a little misinformed.

Mr. David Shaw: Does my hon. Friend agree that the Opposition's campaign was largely based on share options that involved perhaps 40 or 100 people, that the total number of share options at stake was relatively small compared with the fact that in an average electricity company or privatised utility there may be 4,000 or 5,000 relatively junior staff who have share options, and that the opportunity for those people to have share options has been greatly damaged by the way in which the Labour party conducted its campaign?

Mr. Davies: I agree strongly with my hon. Friend. The Labour party's cynical, demagogic campaign did much damage to those companies, which was unjustifiable, given their record of creating value, exports and employment for our country. I also agree with his remarks about the share option scheme. After the controversies of the past six or nine months, in clause 105—and in my hon. Friend's amendment, which we may have an opportunity to discuss later—we have reached a considered and sensible solution.

Mr. Pearson: I take issue with the comments of the hon. Member for Stamford and Spalding (Mr. Davies). Not only were the remarks of my hon. Friend the Member for Edinburgh, Central (Mr. Darling) about the different regulatory regime that the Government adopt towards the privatised utilities correct, but the Greenbury report was exercised by the abuses of the privatised monopolies.
The Greenbury report states:
There is little doubt that the remuneration committees of a number of companies in the privatised water and energy sectors have developed, perhaps unintentionally, remuneration packages that are richer than is required to recruit, retain and motivate quality managers.
That strikes me as meaning that remuneration committees have not followed their fiduciary duties to provide sufficient—and no more than that—incentives for managers.
The Greenbury report continues:
Utility directors should command a greater pay premium where there is substantial competition and risk, where there is a wide diversity of activities or an international spread of operations or where significant technological or structural change is under way".


That, I freely admit, applies to former public companies such as BT, but it does not apply to the water and electricity companies unless we include some of the expensive mistakes that they have made as a result of their diversification programmes.
The Greenbury report concludes:
We strongly recommend that all the privatised utilities in the water and energy sectors should undertake a comprehensive review of their remuneration packages in the light of this report and, if necessary, voluntarily adjust them accordingly.
The report disagrees with the hon. Member for Stamford and Spalding and says that there is a case for remuneration committees to answer—and quickly.

Mr. Quentin Davies: Does the hon. Gentleman concede that there is all the difference in the world between share options, or other remuneration packages, that were decided upon before flotation and those that may be decided on now or subsequently? In the latter case, there is no justification for considering those companies differently from other private sector plcs.

Mr. Pearson: There is a clear case for considering such companies differently, because water and electricity companies are still not subject to the full rigours of international and market competition in the way that ordinary private sector companies, and some other privatised companies, are. The hon. Gentleman's argument does not solve the problem. The public are still angry about the abuses of executive pay and share option schemes in the privatised utilities. He misreads public opinion if he thinks that doing nothing about that is acceptable.
I support the comments of my hon. Friend the Member for Edinburgh, Central about the importance of everyone in the work force benefiting from the legislation. Rather unusually, I pay tribute to the hon. Member for Dover (Mr. Shaw), who has done much sterling work in persuading the Government to change their mind. I suspect that the chief executive of Asda was probably more influential in achieving that volte-face. The fact is that both Greenbury and the Chancellor of the Exchequer botched it, and finally, we are starting to get legislation that looks sensible. Certainly, no hon. Member would begrudge providing a few shares for shelf stackers, the odd cheque for check-out girls and a little bunce for the boys who push the trolleys round at Asda.
I remain concerned about two principal issues. First, there is the balance between executive share option schemes and other forms of option schemes such as savings-related option schemes and profit-sharing schemes. Secondly, there is still built into the system an unfairness that our amendment would partially, but not fully, solve. Share option schemes are inevitably geared towards publicly owned, publicly quoted companies.
In Inland Revenue-approved schemes, the market value of shares in unquoted companies can be negotiated between a private company and the shares valuation division of the Capital Taxes Office. Will the Minister say how many times that takes place? According to Inland Revenue statistics, there are about 4,000 schemes at the moment. My best guess is that the majority of those are schemes with publicly quoted companies.
I suggest that those private companies that have executive share option schemes run them not for the whole work force but for the few private wealth

individuals who own the companies and use the scheme as an extra measure of tax planning. I remain concerned that we are providing tax incentives to individuals simply because they happen to work for publicly quoted companies, whereas people who happen to work for unquoted companies, which is still a large proportion of the work force, do not have such tax breaks. We need to examine that.
I remain to be convinced that share option schemes are encouraging long-term share ownership. They have some benefits as part of an employer's recruitment, retention and motivation strategy. Asda thinks that its share option scheme has been beneficial for staff retention. However, 95 per cent. of people who exercise share options sell them immediately and the average sum involved for individuals who were granted share options, which was given by the Financial Secretary to the Treasury in a debate on 25 October, was £45,000 in 1994–95. When the Asda employees and other shop-floor workers are stripped out of that calculation—averages can be misleading—we find that a limited number of individuals receive substantial options.
Many quoted companies are now thinking about moving away from traditional option schemes, and I welcome Greenbury's injunction on them to do so. Traditional share option schemes must be weighed against other kinds of long-term incentive schemes. I welcome the fact that companies are now beginning to introduce more relative performance criteria. I also welcome moves by many major companies to ensure that, if share options are to be granted, they will be granted for five years or more, even if they are part of approved option schemes.
I welcome the Government's change of heart in terms of not completely excluding share option schemes and introducing a £20,000 limit. It is important, however, that the amendment is adopted on grounds of fairness, because everyone in the work force should be allowed to benefit from such a tax break.

The Financial Secretary to the Treasury (Mr. Michael Jack): This has been a quiet but interesting debate. As the Opposition are now willing to embrace the whole ethic and philosophy of matters associated with share ownership, I now understand why they have played first consideration of this matter, in the context of the Finance Bill, in the svelte tones of the hon. Member for Edinburgh, Central (Mr. Darling).

Mr. Darling: Svelte?

Mr. Jack: Perhaps the hon. Gentleman is not aware of the meaning of svelte. He gave a smooth, quiet, well-mannered and thoughtful presentation of his party's case. He may have done that so that the outside world would not be reminded of the history of how we reached this position.

Mr. Darling: I remember it very well.

Mr. Jack: The hon. Gentleman says that he remembers it very well. Let me take him on a little voyage of all our yesterdays, because it is important to put the amendment into some context.
The hon. Member for Sheffield, Hillsborough (Mrs. Jackson) made a telling intervention, and my hon. Friend the Member for Stamford and Spalding


(Mr. Davies) reminded us of her words. I am delighted that Opposition Members welcome what we are about this evening.
However, this is the same party that objected to the British Aerospace work force having a stake in their enterprise. Some 89 per cent. of the work force acquired shares in that company because of the special terms offered. The Labour party also opposed the privatisation of British Telecom, yet this evening they advocate all-employee share option schemes. A staggering 95 per cent. of British Telecom's work force bought a stake in the company after its privatisation had been opposed by the Opposition. Indeed, 99 per cent. of British Gas's employees bought a stake in their company after the Labour party opposed its privatisation.
I suppose that I must welcome the fact that the sinners are repenting and are now endorsing a policy that has enabled shareholding to rise from some 3 million when we came into office to some 10 million today.

Mr. Quentin Davies: I am anxious that my hon. Friend should always be just in his observations about the Labour party. Has not the Labour party always opposed the idea of directors acquiring options or shares before a company is floated? Did my hon. Friend see the article in the Financial Times of 18 January last year, which said:
Mr. Peter Snape, MP for West Bromwich, East and Opposition spokesman on transport, admitted that he had accepted options on 40,000 shares in his capacity as non-executive director of West Midlands Travel. The Birmingham-based bus company was taken out of local authority hands in a management-led workers buy out in December 1991. Preparations are being made for flotation, possibly in the autumn.
Is it not nice to know that at least some Labour Members are enterprising when it comes to opportunities for acquiring shares on a pre-flotation and no doubt private sweetheart deal basis?

The First Deputy Chairman: Order. That was a long intervention.

Mr. Jack: I hope that my reply will be shorter, Sir Geoffrey.
I am sorry that the hon. Member for West Bromwich, East (Mr. Snape) is not in his place this evening, because he should have an opportunity to explain to the House why he made a principled attack against the proposal for privatising bus services but was prepared to put that to one side and enjoy the benefits of share options, which the policy that he opposed enabled him to have. He may have been ahead of his time, judging by the events referred to only a few hours ago at Prime Minister's Question Time. It is interesting to see the juxtaposition between the principled stand in public and the private change for private gain. My hon. Friend is right, and I congratulate him on his forensic skills in digging that article out.
The amendment has been tabled by the same party that voted against the save-as-you-earn scheme during the Committee stage of the Finance Bill in 1980. In a relatively short time, our policies have woven their magic and Labour Members are now coming round to our way of thinking. If a sinner repenteth, it must be applauded.

Mr. Darling: We are all concerned that this debate should be accurate, and the Minister will no doubt recall

that the last Labour Government first introduced employee share ownership schemes before he and I were in the House. I do not see much advantage in going into these matters in the context of the amendment. Will the Minister simply tell us whether he supports the amendment, or is he happy to side with his hon. Friends in ensuring that the privileged few will benefit from the Government's measures?

Mr. Jack: I shall come to that in due course. I do not disagree with the hon. Gentleman's point about history, but something clearly happened around 1980 to change Labour Members' minds on this matter. In fairness, the hon. Gentleman welcomed the company share option plan and attempted to make a fist of amending it. However, people must be reminded where the Opposition are coming from because, in recent times, they have made much of the virtues of owning some kind of stake in something but have done little to acknowledge that we are the true pioneers in that area.
The hon. Gentleman asked me a straight question: do we support his amendment? Before explaining why we do not, I wish to pick him up on one point. It is typical of Opposition Front-Bench spokesmen to get into their minds a sound nibble such as, "The Tories only want this scheme for the benefit of a few rich, well-heeled people", and to keep repeating it.
I remind the hon. Gentleman of events that occurred on 17 July when my right hon. and learned Friend the Chancellor, having acquired the knowledge of what was in the Greenbury report, moved very quickly to address those concerns and deal with the question at the heart of the hon. Gentleman's probing. As a result of a healthy debate, we now have a scheme on the stocks—the company share option plan in the Finance Bill—that addresses precisely the issue that the hon. Gentleman mentioned. I am sure that he would not disagree that the proposal in the Bill is moderate in terms of who may benefit from share option plans. I believe that the measure addresses his concern, and I hope that we are at one on that. I think that the facts speak for themselves.
One interesting point that we have forgotten is that other all-employee schemes exist. I shall develop that point later, but I first wish to mention a couple of technical points about which the hon. Gentleman asked me. I do not want them to be lost in my general remarks—I listened carefully to what the hon. Gentleman said. He spent some time asking me about the definition of the term "manifestly less". I shall try to deal with the subject carefully as I should hate to mislead the hon. Gentleman or for somebody to read what I say in Hansard and get the wrong impression.
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The set of words repeats the definition used in the old executive share option scheme which the hon. Gentleman, as a lawyer, may have studied carefully. The phrase "manifestly less" has become well known in law since 1984. It means: not less by any amount that can be measured—in practice, not less at all. I hope that that clarifies the position—[Laughter.] I have to give the explanation in language that lawyers understand. The hon. Member for Dudley, West (Mr. Pearson) may sometimes have difficulty with lawyers' language, but the hon. Member for Edinburgh, Central is a lawyer and I


would expect him to understand it. I also expect him to have studied what happened in 1984. Having defined "manifestly less" in legal terms, I will say more simply that shares should not be granted under option at below the market price. That can be understood in everyday language.

Mr. Darling: I appreciate the Minister's reference to 1984. If it is the Government's intention that the price should not be less at all, and as we are all in favour of plain English, why do not the Government break new ground and simply put "less than at all"? Then everyone in the House and, more importantly, outside it, would fully understand. The problem of relying on legal decisions is that lawyers have historically made a lot of money arguing about what is meant. If what is meant is "not less at all", why not say it?

Mr. Jack: For the sake of precision, I perhaps embroidered the words a little. To put the matter beyond misadventure, I shall write to the hon. Gentleman and spell out the precise terms. I shall place a copy of the letter in the Library of the House, so that we can all study it for our greater benefit.
The hon. Gentleman also asked about the 15 per cent. discount. In practice, very few companies use the 15 per cent. discount provisions, and the new company share option plan does not, as the hon. Gentleman's first question suggested, allow a discount to be available. The previous facility was available only if a company also had an all-employee scheme. I hope that I have dealt with the two specific points that the hon. Gentleman raised.
Having welcomed what the hon. Gentleman said in his opening remarks about the proposal of a company share option plan, I should remind him that we already have two existing tax-relieved all-employee schemes: the profit-sharing and the savings-related plans. They were introduced on an all-employee basis to stimulate wider employee share ownership across the board at an affordable Exchequer cost. The objective of the executive option relief introduced in 1984 was different: it was specifically designed to enable companies to reward key employees with options over shares that would increase in value prospectively in response to their hard work and commitment.
As my right hon. and learned Friend the Chancellor explained in July last year, we believe that companies that wish to give incentives to key employees in that way no longer need a tax relief. A variety of option schemes and other long-term incentive arrangements offer alterative ways of linking executive rewards to corporate performance, and none of them qualifies for special tax treatment.
The spirited and constructive debate that started in July last year as a result of my right hon. and learned Friend's announcement that he was going to withdraw tax relief on the existing executive share option scheme revealed that there was a demand for a third type of employee share ownership scheme in addition to the two existing all-employee schemes to provide a more flexible way of granting options to lower-paid employees. That explanation addresses one of the concerns expressed by the hon. Member for Edinburgh, Central when he spoke about who would benefit.
The debate stirred up the issue—the hon. Gentleman exemplified that by mentioning Asda, but that company was not alone. Many other retailers also expressed a wish

to sustain such a scheme. They wanted to target their schemes at the more modestly paid of their employees, such as middle managers and even those on the shop floor. We listened carefully, but the companies that made those representations made it clear that they did not want a compulsory all-employee scheme. My hon. Friend the Member for Stamford and Spalding adverted to that in his telling contribution when he said that there was a difference in every respect between the Government and the Opposition because the Opposition always want to seek compulsion whereas we seek an element of choice.
Those self-same companies wanted to be free to design their schemes as they wished, and to structure them so that they could reward loyalty. If every employee who was with the company on the day that the options were granted had to receive some options—as the amendment suggests—it would be impossible for company share option plans to be used to reward loyalty. That is the first reason why I am unable to accept the amendment.

Mr. Darling: The option is always open to companies.

Mr. Jack: If the hon. Gentleman wants to tell me what it is, he can always intervene. The sedentary debate is perhaps not entertaining the House. I see that the hon. Gentleman is not pushing his point, so I shall continue.
There is an important point to make in relation to smaller companies. The share capital of small companies is a valuable and limited asset. It would simply not be appropriate for such a company to have to grant options to all its employees when it wanted to grant options. In that context, where would the Opposition draw the line? I do not think that they have thought through the effect of the amendment in reality as it shows a clear lack of understanding about small companies.
Today I received a further, supporting piece of evidence that I feel duty bound to put before the House. It came in a letter from the director general of the Institute of Directors, Mr. Tim Melville-Ross, dated 23 January. He said:
Specifically, we do not support the proposal that all employees should be eligible for share options rather than the allocation being at the discretion of management (which is the current position). Replacing management's discretion to provide share options as incentives by the principle of universality represents, in our view, another restriction and inflexibility on business.
Those are telling words. The letter continued:
Moreover, the amendment ignores the particular problems in the unquoted company…It is common in a private company to have to offer share options to attract and motivate one or two key people.
I saw that fact for myself when I visited a fibre optics company called Coe in Leeds. Representations were made to me by the company asking whether the Government could restore a share option scheme—similar to the one that we have introduced—precisely because it had problems attracting a top-quality sales director when it could afford only a limited salary. I believe that the scheme that we have now entirely meets that company's wishes, since the company wanted to focus its scheme on that specific need.
For the reasons that I have given, we should have respect for the difficulties of the small company share structure.


I remind Opposition Members that the new company share option plan tax relief is part of a wider package, which includes substantial improvements to both the existing all-employee share schemes.
The hon. Member for Dudley, West asked about the scope and scale of those schemes. It is interesting to note that about 80 per cent. of listed companies have one or more approved schemes, about 55 per cent. of the companies that have one or more approved schemes are unlisted and about 40 per cent. of companies that have one or more approved schemes have an all-employee scheme. It is interesting that it is in the profit-sharing and save-as-you-earn schemes, in which about 2 million people are involved, that all-employee activity is very widely spread.
The hon. Member for Edinburgh, Central, very properly, asked whether we had considered the scope of who was able to benefit from share participation—whether participation was restricted to a narrow group. I hope that he is now aware, as a result of that exemplification of the numbers involved in the save-as-you-earn and the profit-sharing schemes, that those benefits are very widely available to all employees. I say that because it demonstrates clearly why companies wish to have one other scheme that they can tailor to meet the individual needs of their business. As the Institute of Directors rightly guides us, companies want some flexibility in how they will go about that, especially bearing in mind the special position of the smaller company and its share structure.
For those very good reasons, I believe that we should respect the right of choice. That is what fundamentally separates the Government and the Labour party. Conservative Members believe passionately in the fact that people should have an opportunity to participate in the equity of their company. We have two schemes, which are available already, on an all-employee basis, so it is right that we, as the party of choice, recognise that companies should be free to choose a scheme to meet their needs.
I say to the hon. Gentleman, there is nothing in the way in which that scheme is specified that prevents any company, if it so wishes, from making the scheme an all-employee scheme.

Mr. Darling: Does not the Minister, by his own words, admit that he has certainly given the choice to companies, but it is also choice to deny their work force the chance to participate in share ownership schemes? In other words, it is not giving a choice to the many. Labour Members believe that everyone should have choices in this world, not only the few.

Mr. Jack: We believe in choice by persuasion. [Interruption.] I am sorry, I must return to the hon. Member for Edinburgh, Central. Perhaps he can help me with a word or two of reassurance. He is interested in all employees having an opportunity to participate in the company. I shall give him an opportunity to show the truth of his credentials.
There is a privatisation scheduled for a few months—that of Railtrack. Railtrack has said that it will not have an executive share option scheme but it does want its employees to participate fully in the company by holding

shares. I will give way to the hon. Member for Edinburgh, Central if he wants. Will he now commit himself? It might be difficult to bring your party with you, but take a personal view. I give you the opportunity to say, "I welcome the commitment to the privatisation of Railtrack and the opportunity for the staff to own shares in the company." Will you interrupt me and tell me—

The First Deputy Chairman: Order. On several occasions, the Minister used the word "you". I am not responsible.

Mr. Jack: The enthusiasm of my argument has led me again to cause you to interrupt, Sir Geoffrey; thank you for correcting me.
I ask the hon. Member for Edinburgh, Central, through the Chair, is he able to tell me—having had a little extra thinking time—that he would like the employees of a privatised Railtrack to have that opportunity, or does he wish, by opposing that privatisation, to deny those employees that opportunity to own shares?

Mr. Darling: rose—

Mr. Jack: I give way. This could be historic.

Mr. Darling: I am grateful to the Financial Secretary. He must realise that we are arguing about the opportunity to ensure that, in companies throughout the country, there is the widest opportunity for many to participate in those companies' success. The argument about the privatisation of Railtrack and rest of the railway network has nothing to do with that, as well he knows. I suspect that I speak, not only for Opposition Members, but for a majority in the country, who want nothing whatever to do with breaking up the rail network. That process is purely designed to satisfy a tiny minority in the country, and the vast majority of the public would suffer as a result. It has nothing to do with the amendment, as well the Financial Secretary knows.

Mr. Jack: I think—

The First Deputy Chairman: Order. The Minister would be wise not to go down that track. The privatisation of the railways has nothing to do with the debate.

Mr. Jack: I entirely take your guidance, Sir Geoffrey, but that answer is another example of Labour hypocrisy, because, as I said earlier in response to an intervention by my hon. Friend the Member for Stamford and Spalding, when the Opposition choose to deny something, they will follow that, but when it comes to personal gain, as we saw with reference to the hon. Member for West Bromwich, East, we know what the answer is. The hon. Gentleman was unable to give me the satisfaction that I sought.
On the basis of the amendment, which has been—

Mr. Darling: Will the hon. Gentleman give way?

Mr. Jack: I wish to—

Mr. Darling: On a point of order, Mr. Deputy Speaker. I am sure that the Minister did not mean it, but, as I


understand it, one is not supposed to accuse hon. Members of hypocrisy in the House and I deeply resent the suggestion that I am guilty of hypocrisy about Railtrack. I think it might be better—

Mr. Richard Ottaway: Hypocrisy is a sensitive subject today!

Mr. Darling: The Whip speaks from a sedentary position.
Privatisation of Railtrack is a matter of concern to this country. The Financial Secretary might be better dealing with the merits of his argument—which, I am bound to say, I struggle to see—instead of indulging in this silly sort of thing, which might go down well in the Conservative party bar room but is not terribly suitable for debate.

The First Deputy Chairman: Order. I did not understand that the Minister was using the word "hypocrisy" regarding an individual. If he was, I am sure that he would wish to withdraw it.

Mr. Jack: I would never wish to insult any hon. Member on a personal basis, and if the hon. Member for Edinburgh, Central thought that that is what I said, let me say to him that I unreservedly withdraw any smear on him as an individual. As you rightly said, Sir Geoffrey, my use of the word "hypocrisy" was in the context of the Labour party as a collective, not the hon. Member for Edinburgh, Central. I would not want in any way to go beyond that.
There is another technical hitch in the amendment. I was surprised to see that it would require part-time directors to participate in the scheme. The hon. Member for Edinburgh, Central may have overlooked the fact that the guidelines for institutional investors, which are produced by the Association of British Insurers, state very clearly that part-time directors should not participate in share option schemes. That is an important factor, and another reason why I am unable to accept the hon. Gentleman's amendment.
We have had a very thorough debate. The Conservative party is the party of wider share ownership. I welcome the Opposition's endorsement of the company share option scheme, but I hope, for the reasons given, that the hon. Member for Edinburgh, Central will understand why, at this stage, I am unable to accept his amendment.

Mr. Tipping: I am pleased to have had the opportunity to listen to the Financial Secretary's remarks. I generally welcome the changes to executive share options that are set out in the Finance Bill. The Financial Secretary made some historical references early in his speech, and perhaps it is worth remembering how the clause came to be a part of the Finance Bill.
We should remember that the Government vacillated over the Greenbury report, which formed the basis of the clause. Some of us argued that the Government should have done the work themselves. The Government's response to Greenbury can only be described as erratic. The Chancellor reacted quickly on 17 July, but he lived to rue that day. Archie Norman and the employees of Asda forced him to change his mind by pointing out that the Chancellor's actions did not fit the bill.
The amendment is important because it seeks to extend the share option scheme, as laid down in the Finance Bill, to all employees. It requires that, in order for a scheme to be approved, all employees and directors must be able to participate on equal terms. I was interested to hear the Financial Secretary's remarks about choice: he argued that our amendment should be rejected because it forbids choice.
The Asda episode shows—as the amendment does—that we want choice for all. We want all employees to have the opportunity to participate in a scheme of that kind. That is fundamentally important. If we were to follow the track laid down by the Financial Secretary, we could return very quickly to the bad old days of perks for a few and a handicap for the majority of the work force. I believe that "choice" means that everyone should be able to choose: all employees should have the right to participate in share option schemes. That is why the amendment is so important.
It is also important to recognise that the share option issue has generated real public concern. People come to my surgery and talk about the benefits and the perks that the fat cats, as they call them, have enjoyed under share option schemes in the past. They find it hard to understand why the newly privatised gas, electricity and water industries offer such perks. I believe that the public's view resonates very strongly: everyone who is involved in those industries should have the same right to choose.
As I am talking about those who attend my surgeries, I shall mention two firms about which people have relayed their concerns. I refer first to East Midlands Electricity. I know the company well and I have a great deal of respect for it. I remind the Financial Secretary that the company's former chairman and chief executive, John Harris—whom I hold in high regard—left the company with a very good pay-off of reportedly £1 million, partly in share options. The second company that local people raise with me is Severn Trent. Its former chairman, John Billock—whom I know and admire—also left that company with a big pay-off.
The Financial Secretary talked at length about the need to reward success. In both the cases that I mentioned, the gentlemen involved left their respective companies in rather unfortunate circumstances. Their pay-offs were not so much a measure of success and a reward for that success as a way of getting them out of the way quickly. In the case of East Midlands Electricity, it is clear that the company diversified, bought into electricity contracting and then caught a cold. It was forced to refocus on the core business under new management.
I know the new management of East Midlands Electricity well, and I am pleased to hear it say that it is sceptical about the value of share options. It takes the view that they have given the company and the entire industry a bad name. The former chairman of Severn Trent, Mr. Billock, also left partly because of difficulties with the company's performance. It is okay to reward success; I agree with that fundamentally.

Mr. John Marshall: Does the hon. Gentleman agree that that point emphasises the merits of a different recommendation of the Greenbury committee regarding the length of service contracts? If we were to reduce the length of such contracts to one year, many large pay-offs would not occur. It has more to do with the length of service contracts than with share options.

Mr. Tipping: The hon. Gentleman makes a fair point. The length of service issue is important. Like him, I would


like to see more short-term contracts of about one year's duration. At Severn Trent, the diversification into waste disposal and the acquisition of Biffa led to problems within the company.
The public find it hard to believe that the chief executives at East Midlands Electricity and Severn Trent did the same job in the privatised industry as when the companies were under public ownership. They also find it hard to accept the monopoly position that put the companies into such advantageous positions. They do recognise that, at the end of the day, the whole company is underwritten—there is a safety net—by its ability to raise prices. If things go wrong, the consumer will pay.
The employees of the newly privatised utilities will also be affected. The Financial Secretary was rather dismissive of the scare stories—as he put it—about executive share options and the perks that the top men in such companies enjoy. We must remember that many employees of the water and electricity companies, in particular, have lost their jobs. The companies have achieved success through efficiency measures, and the most basic efficiency measure is to reduce the number of staff.
I have a lot to do with National Power. Its officers have been extremely generous in their willingness to show me around the company and to talk with me. I do not have any financial interest in the company—I can see that the hon. Member for Dover (Mr. Shaw) is listening to me very closely. The management of National Power has allowed me the latitude to walk around the company and to discuss the past and the future. About two thirds of the company's employees have lost their jobs. At the same time, the executives of the company have seen their pay explode. I look forward to watching the share options, the salaries and the pensions of people in the generating industry.
Only the other day, I was looking closely at the share prices of electricity companies. The prices have fallen, for reasons that are not entirely in the companies' control, but on which they have some input. I look forward to seeing whether the executives' benefits fall as well.
If the amendment were implemented, it would lead to some fundamental changes in the way that companies operate in the United Kingdom. There would be more transparency, because all employees would be involved. I and others find it hard to discover the real benefits being given to directors and chief executives of newly privatised industries. If all employees had the right to be members of a share option scheme, that would lead to greater transparency.

Mr. Jack: I agree with the hon. Member that it is a good idea to have employee participation in companies. However, there is some evidence that, if there were to be a scheme such as that to which the amendment refers, some companies might decide that they did not want to run a company share option scheme. Does the hon. Member think that that is a risk worth running?

9 pm

Mr. Tipping: That may be a risk, but it is a choice for the company. I feel strongly that the benefits of such schemes would outweigh the disadvantages enormously. The first benefit would be transparency. The second

benefit would be that everyone in the company would have a sense of stakeholding and shareholding. The schemes would be a recognition that people were companies' greatest assets and they would make companies realise that they should invest in and add value to people. The amendment clearly would do that.
If people had a shareholding or stakeholding in the company, it would lead to a long-term view. People who work for major companies are committed to their success. For example, the coal miners who work for Coal Investments Ltd. gave up their holidays when the company was in trouble over Christmas and went in to work. The schemes suggested in the amendment would reinforce that view.
Companies should be open, transparent and fair to everybody, not just to the few, and they should take a long-term rather than a short-term view. That is why I support the amendment.

Mr. David Shaw: May I extend my apologies to the House? On the flight back from the European Parliament, where I was today attending the Labour and Social Affairs Committee, I was delayed at a border control at Brussels airport which, according to everything we are told, does not exist. It was very real.
I am speaking in the debate because I have long had an interest, although not a personal, pecuniary interest, in how employees should be rewarded and share in the success of their companies. I have never had share options myself, but over the years I have sat on the boards of one or two companies and awarded share options to certain individuals. The decision-making process has been interesting, as has seeing the way in which share options can reward people.
I have always made a practice of looking not just at directors or managers as recipients of share options but at secretaries and middle and lower management, to encourage a broad spectrum of employees. We did not necessarily award share options to every member of the company. There were often good reasons for not awarding the options to some individuals. Sometimes, sadly, it might have been better if individuals had got a job elsewhere, and sometimes people were relatively new to the company and were still untried and untested.
I also have a long-standing interest in share options from a constituency point of view. During the 1987 election—the one that got me into the House—we were shown around the Buckland paper mill, which was lucky enough to be visited also by someone called Kenneth Clarke, now known to the House as the Chancellor of the Exchequer. Kenneth went around the paper mill and met the secretaries and typists, who were fully aware of the success of their company. They were interested in the share price and in how the mill was performing as part of a larger group.
The thing that impressed the current Chancellor was that those people's share options gave them an added interest in the company—they felt that they were part-owners of it. That feeling extended down to the shop floor, where the mill produced Conqueror paper, which is famous not just because it is used in the House of Commons but because it is unquestionably one of the best papers in the world.
The people in the company took great pride in owning part of the manufacturing process. They were thoroughly involved at every stage and, because of their share


options, were keen on the success of the company. That is why I have a passion for share options as a way of motivating company employees.
The employees of P and O in my constituency—hundreds of them—also own share options. Junior onshore staff and more senior officers on board the ferries that make Dover a successful part of the country participate in share option schemes, which are clearly beneficial to many people in my constituency.
Within a month of his appointment as Financial Secretary, the Minister rapidly apprised himself of an enormous amount of information once the debate on share options got under way, and I thank him for that. We were both shocked by how complex some of the details of the argument can be, but we discovered that fundamental misconceptions surround share options and share option schemes. All the focus on fat cats and directors diverted attention from the hundreds of thousands of employees who were benefiting and who had benefited from share options. We should not forget that just under 1 million people are in this category; I hope that that number will be exceeded under a Conservative Government in the near future.
Another key misconception concerns the fact that people forget that these are approved discretionary share options. They became known as executive share options, however. Although it was often envisaged in the early stages that senior management and top people would be the main beneficiaries, it was soon discovered that junior employees—secretaries, typists, bank clerks—would also be significant beneficiaries, and rapidly became so. We found, in short, that the social spectrum was much more widely covered by share options than many people expected. They rapidly became another element in the expansion of democratic capitalism.
I was delighted to read all the research showing just how wide and deep the ownership of share options had become—just like the ownership of shares.

Mr. Denis MacShane: The hon. Gentleman will have read today that Mr. Archie Norman, a wannabe Tory Member, has just cashed in £3 million in share options—a modest addition to his private fortune. The problem was that the Asda share price dropped by 3p, thereby wiping out a considerable part of the value of the shares of ordinary investors in Asda. Which is more important—the immense gain that Mr. Norman has pocketed, or maintaining the value of the Asda shares in which many ordinary investors, through their personal equity plans and unit trusts, may have placed their faith?

Mr. Shaw: When Archie Norman went into Asda, the company was flat on its back; it was suffering badly from competition from supermarket chains that were much more successful, and 37,000 of its employees faced the possibility of losing their jobs during the recessionary period if it had gone under. It was very close. It was within a whisker of going under. Archie Norman rescued the company. I have spoken to a number of his junior employees and not one of them begrudges him his share option profits. They are happy that he rescued their jobs and the company.
It also benefits consumers because it is one of the most competitive companies in terms of getting price reductions. It has forced the abolition of the net book

agreement, and many books are much cheaper than before. It is putting pressure on a number of other restrictive practice agreements or other price arrangements that exist, and it is forcing down quite successfully the price of a number of products.
Asda's chief executive should benefit not just because he has benefited the employees but because he has benefited consumers and others in this country enormously. The Treasury has also benefited because Asda is paying quite a few millions in corporation tax, which, if it had gone bankrupt, it would not have paid.

Mr. John Marshall: rose—

Mr. Shaw: I give way to my hon. Friend.

The First Deputy Chairman: Order. Before the hon. Gentleman gives way, I am afraid that he has allowed himself to stray from the amendment, probably because of the question from the hon. Member for Rotherham (Mr. MacShane). He should now relate his remarks to the amendment before us.

Mr. Marshall: On Asda and share options, will my hon. Friend confirm—to answer those who are concerned about Asda shareholders—that, under the guidance of Mr. Norman, Asda shareholders have seen the share price treble, which is quite a good achievement? Even the hon. Member for Rotherham might give an alpha double plus.

Mr. Shaw: There is no doubt that, if "stakeholder" has any meaning whatever, one can truly say that all the stakeholders in Asda have truly benefited under Archie Norman and the Conservative Government who have made the environment right for them to benefit.
I now return to some of the key points. My hon. Friend the Financial Secretary was kind enough earlier in the summer to see me to discuss share options and to listen to some of my concerns and those of a number of organisations and others. I realised that he had considerable experience of option, incentive and share schemes from his involvement in companies—in the years before he came into Parliament—and that he had observed the benefits that tying in staff, in a way that gives them an interest in the company, can produce. I was grateful to him for the sympathetic way in which he listened.
When a Minister moves to a new Department, especially the Treasury, it is always interesting to see the extent of his commitment to some of our fundamental policies, and whether perhaps the Treasury atmosphere rapidly gets the better of him. I was delighted that my hon. Friend the Financial Secretary was able to assure me of his commitment to a shareholding democracy. He was able to assure me that he, like me, is proud of the fact that there are 11 million shareholders compared with 3 million when we got into office, and that 16 million people have life assurance policies and pension policies. I was also pleased that the Prime Minister is committed to widening share ownership. I felt, therefore, that there was a chink of light, that it was possible to push open the door, not only in relation to keeping share schemes but to seeing whether they could be better targeted at the very people whom we want to help.
It was apparent from discussions with my hon. Friend the Financial Secretary that he wanted to look after the thin cats and even, perhaps, one or two of the thinner cats who were putting on just a modicum of weight but were well short of becoming fat cats. I am delighted that his work during the summer and the work on the Budget have produced this share option scheme. It is important that my hon. Friend has recognised that share options are about giving people the incentive to create jobs. It was apparent that he had some knowledge in that area.
Let me recap some of the benefits of share option schemes and their purpose. The fat cat/thin cat debate has sometimes taken us off the main track.

The First Deputy Chairman: Order. This is not a clause stand part debate but a debate on the amendment. The hon. Gentleman should confine his remarks to that.

Mr. Shaw: I shall try to ensure that I keep to the point. The implications of the amendment are in danger of not being fully understood unless one focuses on the purpose of share option schemes.
One of the key purposes of share option schemes is to help lower and middle income employees. Another is as a source of equity finance. I am not saying that the amendment would necessarily damage those, but it would begin to move the share option schemes away from some of their original purposes.
As well as encouraging a share-owning democracy, the number of share option schemes demonstrates how effective they are. My hon. Friend the Financial Secretary said that the amendment could damage the number of share option schemes that people might want to set up in the future, so we should not support it.
Loyalty is regarded as a key issue in the awarding of share options, but the amendment would remove the loyalty incentive. It would mean that everyone could have share options regardless of their loyalty to the company and regardless of how management and directors saw that loyalty helping the company's performance.
In addition, there must be flexibility within high technology companies. The amendment might remove such flexibility, because high-technology companies will have to reserve the share options with a little bit extra for some of the high-tech and skilled staff that they need to retain.
We also need to consider whether the amendment would encourage the development of the common interest between employees and shareholders. If employees feel that they will get something automatically as of right simply because they work in the company, it is not quite the same as if they are given an incentive to produce the extra value in the company which will benefit its shareholders and employees. The amendment is not in line with the basic philosophy behind share option schemes, so I cannot support it.
Share option schemes are often used as a substitute for pension schemes in small companies that cannot afford conventional pension schemes. That may not be contrary to the amendment, but the amendment will not necessarily assist.

As I discovered, share option schemes are often used to help inward investment. American companies are keen on United Kingdom employees benefiting from the share option schemes of the parent company in America, and that is possible under the law. I am not certain that the amendment would work in favour of such an arrangement. My hon. Friend might wish to consider that when he replies.
The amendment might make life difficult for such American companies, many of which want to put their British employees on parallel employee remuneration and incentive packages as the American companies' employees in the United States. All those arguments show why the Government are right to bring in the new scheme and why the amendment is not quite right.
Sir Richard Greenbury was mentioned earlier. I remind the House that his report concerned directors. When I spoke to him, he told me that he did not intend his proposals to affect arrangements for share options further down the income scale and further down the hierarchy within companies: he did not intend them to have any impact on shop girls, supervisors or even junior managers. The amendment is rather dangerous. Some companies will want to make share options available to all employees; others will want to make them available to only a small number, which I do not think is necessarily wrong.
I am delighted with the way in which the Government have approached the matter so far, and I hope that I can express further delight when we debate a later amendment tabled in my name. Amendment No. 6 would make share option schemes too rigid, and might damage some of them. As my hon. Friend the Financial Secretary has suggested, some companies might even not implement schemes as a result. If the amendment were passed, people might be entitled to share options regardless of their performance. Schemes should operate with some flexibility, allowing the benefit of share options to be earned only by employees whose performance makes their companies successful. I shall vote against the amendment if it is put to a vote.

Mr. Mike O'Brien: As the Financial Secretary said, this has been a good and thorough debate.
The Government's main objection to the amendment seems to be that it would benefit too many people. So much for their idea of a shareholding democracy. After 16 years of Tory government, only 17 per cent. of shares are owned by individual shareholders; that is the lowest percentage for a very long time, perhaps the lowest percentage ever.
My hon. Friend the Member for Edinburgh, Central (Mr. Darling) welcomed clause 105 as far as it went, but Opposition Members feel that it does not go far enough—hence the amendment. In an effective speech, my hon. Friend the Member for Sheffield, Hillsborough (Mrs. Jackson) pointed out that the Labour party approved not only of employee share ownership, but of the granting of share options. She also said that most employee shareholdings were small or even token. She pointed out that Asda, for instance, has 36,000 shareholding employees, which is welcome, but none of those employees is in the same league as the fat cats in the privatised utilities. As the hon. Member for Dover (Mr. Shaw) observed, a distinction must be drawn between the fat cats and those whom he described as the thin cats. I shall return to the hon. Gentleman's speech when he is less busy than he appears to be at present.


My hon. Friend the Member for Hillsborough also spoke of her experience of the hypocrisy issue, as she described it, at the Yorkshire Water annual general meeting. Our agenda deals with the points that she raised: it seeks to help all shareholders, not just employee shareholders. The amendment fits well within that overall agenda.
The hon. Member for Stamford and Spalding (Mr. Davies) suggested that Labour's policy was "populistic". I suspect that it will indeed be popular, just as I suspect that his and the Financial Secretary's appeal for selectivity in granting share options will have much less popular appeal.
The hon. Member for Stamford and Spalding condemned the Labour party for distinguishing between privatised utilities and other plcs. I noticed that the Financial Secretary seemed to squirm at that because, as he knows, the Government make that distinction in terms of the regulatory regime that they impose.
A highlight of the debate occurred when my hon. Friend the Member for Dudley, West (Mr. Pearson) paid tribute to the hon. Member for Dover, who, during the great debate on these matters last year, helped to expose the Government's inadequacies in terms of their share options policy. Perhaps I may discomfit him still more by echoing that praise from the Labour Front Bench. I know that he takes a genuine and, it seems from his speech, informed interest in these matters. He went so far as to bring "Ken", as he described him, to talk about these matters to his constituents, who I am sure were greatly thrilled by that visit.

The First Deputy Chairman: Order. I hesitate to intervene, but the word "Ken" has now been used twice. I am sure that both hon. Members know that we do not refer in the Chamber to people's names—the hon. Gentleman should say," the right hon. and learned Member" or "the Chancellor of the Exchequer".

Mr. O'Brien: You are right, Sir Geoffrey. I put the name in quotes, but you are right to correct the hon. Member for Dover and me.
Mr. Christopher Whitehouse's text book, "Revenue Law: Principles and Practices," says of executive share options:
The reason that many more of these schemes have been established than all employee schemes is precisely because they are not all employee schemes and benefits under them can be granted to selected employees and because the value of the benefits they can be given is much higher. Those company directors who granted share options saw great advantages to themselves in the schemes. They could be selective about who they gave the benefits to and so"—
all too often—
they gave the benefits to themselves. For the directors of the newly privatised utilities, they became great milch cows, providing perks, pensions, pay rises
and all sorts of other wonderful benefits.
The Financial Secretary asked us to go into a history of what he called "all our yesterdays". The fact that I understand that phrase may date us both, but I remind him that it was Labour that initiated proposals for increased employee shareholding. Labour's 1978 profit-sharing scheme provided favourable tax treatment only if all employees with at least five years' experience benefited on similar terms.
The 1980 "save as you earn" scheme introduced by the Conservatives continued the principle of benefits on similar terms, but in 1984 Lord Lawson introduced the approved discretionary share option scheme—executive share options. That removed restrictions and allowed the company—in practice, directors of the company—to choose who received the benefits. The 1984 scheme gave a one-way bet: an option to purchase if the share price rose—if it fell, no one would need to buy the shares.
Executive share options were always aimed at a small group. On introducing them, Lord Lawson said that his aim was
to increase the incentives and motivation of existing executives and key personnel".—[Official Report, 13 March 1984; Vol. 56, c. 299.]
Those options were not intended for all. They were a special incentive for the preferred. The taxpayer provided a double largesse to directors in the privatised gas, water and electricity companies. Not only was the taxpayer forced by the Government to sell off the shares at a knockdown price, but the options on shares had a built-in, guaranteed price increase which, coupled with the tax concession, meant that those who had a lot of shares made an awful lot of money.
The schemes allowed massive profits that were unjustified by performance. In British Gas alone, 1,042,141 share options were awarded to its directors, including 268,000 to Cedric Brown, the chief executive. That was on top of his salary rise, following privatisation, of 75 per cent. As privatisation progressed, so the scandals surrounding share options grew.

Mr. Geoffrey Clifton-Brown: Why does the Labour party want all those eligible to receive share options to have them on similar terms? Why should not directors give different employees in different areas of the company, who might have contributed different amounts to the company's profitability, different levels of share options?

Mr. O'Brien: The hon. Gentleman was not here for the earlier part of the debate, so he does not realise that we have already dealt with that point, which was raised by the Financial Secretary. Indeed, I intend to deal with it again later in my remarks. If the hon. Gentleman had watched our debate on television or attended the Chamber he would be a little better informed about what has been said.
I was outlining the ways in which the various privatised utilities had benefited. In all, they issued more than £100 million in share options. Many of those options have yet to be exercised and the benefits realised. Coupled with that, we have seen directors earning massive amounts through Government policies on share options. As my hon. Friend the Member for Sherwood (Mr. Tipping) said, 40,000 jobs were lost in the electricity industry, 9,000 in the water industry, 26,000 in British Gas and 90,000 in British Telecom.

Mr. John Marshall: Does the hon. Gentleman agree that those massive job losses show that those industries were heavily overmanned when they were in the public sector, which is a further justification for their privatisation?

Mr. O'Brien: It is interesting to hear the hon. Gentleman justify unemployment. Is that his policy?


Is that what he wants? Does he want to justify an increase in unemployment? That is the record of the Conservative Government.

Mr. Marshall: The hon. Gentleman asked whether it was my policy to increase unemployment. Is he not aware that unemployment in Britain is lower than anywhere else in the European Union? Is he not aware that the level of employment in Britain is higher than in almost any other European country? That is job creation. The hon. Gentleman supports job destruction through the social chapter and a minimum wage.

Mr. O'Brien: The hon. Gentleman tried to justify job destruction in the privatised utilities and then tried to suggest that in some way he was responsible for lowering unemployment. In fact, since the Conservative party took office, unemployment has doubled.

Mrs. Helen Jackson: Have not the job losses in the privatised utilities occurred partly as a result of the huge practice of outsourcing and contracting out core operations such as sewerage and water pipe maintenance, which should be done by the employees who then—

The Chairman of Ways and Means (Mr. Michael Morris): Order. We are debating share options, and we should get back to that subject.

Mr. O'Brien: My hon. Friend the Member for Hillsborough is right, but I heed your words, Mr. Morris.
Even the Prime Minister said:
I do not agree with the excessive and unjustified salary increases. I have made that perfectly clear. But for companies within the private sector that must be a matter for shareholders and not for the Government."—[Official Report, 22 November 1994; Vol. 250, c. 464.]
The Government refused to intervene and deal with the abuses in the privatised utilities. As my hon. Friend the Member for Sherwood said, they vacillated and abdicated their responsibility to end the abuse. In contrast, Labour has always believed that the Government must undertake the minimum amount of intervention necessary to correct market failures and inadequacies and to enable the economy to work fairly for all society. Labour wants competition and success in industry. We recognise that the market can sometimes fail, so minimal intervention by Government is right to create the circumstances for fairness. That is why we put forward the amendment.
Eventually, the Government were forced to do something, due to the anger of the public and the campaigns of Labour Front Benchers. The Government appointed a committee of directors to look at salaries and share options for directors—again, an example of double standards. Here I should refer to the amendment, because the debate at that time is the reason why we tabled the amendment. The Government decided to deal with the abuses by appointing a committee of directors to consider their own salaries and conditions. When have the Government ever suggested that, if nurses want a pay rise, they should set up a committee of nurses to determine how much that rise should be? That was an abdication of leadership on the part of the Government.
The amendment takes further Labour's campaign to create a stakeholding economy, and clearly delineates the difference between the parties. While the Conservatives created perks for the privileged in 1984, Labour wants to give all employees a stake in their companies. The amendment helps to crystallise the distinction between the Conservatives and Labour. Workers already have a limited stake in their companies through their jobs and through their dependence on those jobs for an income for their families, but we want to give them a greater stake in the future of the business and allow them to identify even more with the success of the enterprise.
Many firms already recognise the importance of employee stakeholding, which provides motivation and incentives for people at work. Labour believes that shareholding by employees is a key way forward as we try to create a British stakeholding economy, and it can also bring massive benefits to British industry. One of the great failures of the Tory Government is that, for all their rhetoric, they have not provided the shareholding democracy that they have advocated. The Government schemes to increase employee share ownership have all too often been open to the sort of abuse that has taken place in the privatised utilities.

Mr. Jack: Does the hon. Gentleman acknowledge that 2 million people are involved in the profit-sharing and save-as-you-earn schemes? Does he further acknowledge that, since we came to power—as my hon. Friend the Member for Dover (Mr. Shaw) said—the number of shareholders in this country has risen from 3 million to 11 million?

Mr. O'Brien: Labour's policy of introducing a profit-sharing mechanism in 1978 led to the similar save-as-you-earn scheme, which enabled a number of employees to get involved in their companies. The Financial Secretary praises our scheme—it is a scheme that the Government copied from Labour—but he tries to justify restricting the availability of shares, although he claims to advocate that they be made available to all employees in the company. If he was in the House at time, there can be no doubt that he voted in 1980 to ensure that all employees should be involved, so why does he now want to deny them that involvement? Why does he say now that those employees should not participate in their own companies?
We need a change of culture in British companies. There must be an end to the conflicts between management and workers and a realisation that all have a vested interest in the long-term success of the company. Employee shareholding can help to do that. Many employee shareholders will work for a company for many years, so they will have a vested interest in looking to the long-term success of the business. They will see the benefits of investing now to secure jobs and prosperity for the future, rather than seeking short-term high dividends because their money can flit from one share to another.
Because of that long-term perspective, employee shareholders can help to put right the weaknesses in our financial institutions, particularly their short-sightedness and their under-investment in industry. Employee shareholding will be beneficial to the public, as it will help the economy and encourage a long-term perspective that will help investment in industry. Therefore, it is in


the public interest, the taxpayer's interest and the Government's interest to use the tax system to promote employee shareholding.
Where the scheme can benefit all, so all should contribute through incentives in the tax system to encourage it. We want the amendment to be carried because it will benefit each and every employee, and benefit the nation also—something that can never be said of the Government's executive share option scheme. Whatever the Government hoped in 1984, the lax wording and the opportunities for abuse resulted in the scheme disproportionately benefiting an elite of directors. It is the failure of the 1984 scheme and the inadequacy of the Government's attempts to amend it to which the amendment is addressed.
During the controversy last year, the Conservatives never fully understood the anger and outrage of the British people at the abuses of share options. The amendment and clause 105 are the results of that anger. At a time when taxpayers were being told that they had to shoulder the burden of the highest tax increase ever imposed on the British people, when Britain was in the midst of a recession, and when unemployment stood at appalling levels—more than double the level when the Conservatives took office—a privileged elite of directors, mainly in the privatised utilities, abused a legal power to grant themselves excessive pay rises and share options in a tax-efficient way, thanks to the Government. The Tories saw nothing wrong with that, so out of touch were they with the British people. They never understood the anger about executive share options, any more than they understood the anger over VAT on fuel.
The British people objected to the simple unfairness of it all. Our people have an innate sense that things should be fair, and the executive perks in the privatised utilities breached that British sense of fairness. The Government are not in touch with that basic instinct of the British people because they do not share it. In this amendment, Labour has moved a policy which is fair, which will ensure that share options are open to all employees and which is based on all employees having a stake in a company rather than serving only the interests of the elite who control the company.
Our amendment to clause 105 speaks for the many in Britain. We want everyone to have a stake in their company, their future and their country. That is the real distinction. While the Government speak for the few, Labour speaks for the many. That is why the amendment deserves support.

Question put, That the amendment be made:—

The Committee divided: Ayes 255, Noes 276.

Division No. 33]
[9.40 pm


AYES


Abbott, Ms Diane
Barnes, Harry


Adams, Mrs Irene
Battle, John


Ainger, Nick
Beckett, Rt Hon Margaret


Ainsworth, Robert (Cov'try NE)
Beith, Rt Hon A J


Allen, Graham
Bell, Stuart


Alton, David
Benn, Rt Hon Tony


Anderson, Donald (Swansea E)
Bennett, Andrew F


Anderson, Ms Janet (Ros'dale)
Benton, Joe


Armstrong, Hilary
Bermingham, Gerald


Ashdown, Rt Hon Paddy
Berry, Roger


Ashton, Joe
Betts, Clive


Austin-Walker,John
Boateng, Paul





Bradley, Keith
Hall, Mike


Brown, Gordon (Dunfermline E)
Hanson, David


Bruce, Malcolm (Gordon)
Harvey, Nick


Burden, Richard
Hattersley, Rt Hon Roy


Byers, Stephen
Henderson, Doug


Callaghan, Jim
Heppell, John


Campbell, Mrs Anne (C'bridge)
Hinchliffe, David


Campbell, Menzies (Fife NE)
Hodge, Margaret


Campbell, Ronnie (Blyth V)
Home Robertson, John


Campbell-Savours, D N
Hood, Jimmy


Canavan, Dennis
Hoon, Geoffrey


Cann, Jamie
Howarth, Alan (Strat'rd-on-A)


Carlile, Alexander (Montgomery)
Howarth, George (Knowsley North)


Chidgey, David
Howells, Dr Kim (Pontypridd)


Chisholm, Malcolm
Hoyle, Doug


Clapham, Michael
Hughes, Robert (Aberdeen N)


Clark, Dr David (South Shields)
Hughes, Simon (Southwark)


Clarke, Eric (Midlothian)
Hume, John


Clarke, Tom (Monklands W)
Hutton, John


Clelland, David
Illsley, Eric


Clwyd, Mrs Ann
Ingram, Adam


Coffey, Ann
Jackson, Glenda (H'stead)


Cohen, Harry
Jackson, Helen (Shef'ld, H)


Connarty, Michael
Jamieson, David


Cook, Frank (Stockton N)
Jones, Barry (Alyn and D'side)


Cook, Robin (Livingston)
Jones, Martyn (Clwyd, SW)


Corbett, Robin
Jones, Nigel (Cheltenham)


Corbyn, Jeremy
Kaufman, Rt Hon Gerald


Corston, Jean
Keen, Alan


Cousins, Jim
Kennedy, Charles (Ross,C&S)


Cunningham, Jim (Covy SE)
Kennedy, Jane (L'pool Br'dg'n)


Cunningham, Roseanna
Khabra, Piara S


Dafis, Cynog
Kilfoyle, Peter


Dalyell, Tam
Kirkwood, Archy


Darling, Alistair
Lestor, Joan (Eccles)


Davidson, Ian
Liddell, Mrs Helen


Davies, Bryan (Oldham C'tral)
Litherland, Robert


Davies, Chris (L'Boro & S'worth)
Livingstone, Ken


Davies, Rt Hon Denzil (Llanelli)
Llwyd, Elfyn


Davies, Ron (Caerphilly)
Loyden, Eddie


Denham, John
Lynne, Ms Liz


Dewar, Donald
McAllion, John


Dixon, Don
McAvoy, Thomas


Dobson, Frank
McCartney, Ian


Dowd, Jim
McCrea, The Reverend William


Eagle, Ms Angela
McFall, John


Eastham, Ken
McKelvey, William


Etherington, Bill
McLeish, Henry


Evans, John (St Helens N)
Maclennan, Robert


Ewing, Mrs Margaret
McMaster, Gordon


Fatchett, Derek
McNamara, Kevin


Faulds, Andrew
MacShane, Denis


Field, Frank (Birkenhead)
McWilliam, John


Flynn, Paul
Madden, Max


Foster, Rt Hon Derek
Maddock, Diana


Foster, Don (Bath)
Mahon, Alice


Foulkes, George
Mendelson, Peter


Fyfe, Maria
Marek, Dr John


Galbraith, Sam
Marshall, David (Shettleston)


Galloway, George
Martin, Michael J (Springburn)


Gapes, Mike
Maxton, John


Garrett, John
Meacher, Michael


George, Bruce
Meale, Alan


Gerrard, Neil
Michael, Alun


Gilbert, Rt Hon Dr John
Michie, Bill (Sheffield Heeley)


Godman, Dr Norman A
Michie, Mrs Ray (Argyll & Bute)


Godsiff, Roger
Milburn, Alan


Golding, Mrs Llin
Miller, Andrew


Gordon, Mildred
Mitchell, Austin (Gt Grimsby)


Graham, Thomas
Moonie, Dr Lewis


Grant, Bernie (Tottenham)
Morgan, Rhodri


Griffiths, Nigel (Edinburgh S)
Morley, Elliot


Griffiths, Win (Bridgend)
Morris, Rt Hon Alfred (Wy'nshawe)


Grocott, Bruce
Morris, Estelle (B'ham Yardley)


Gunnell, John
Morris, Rt Hon John (Aberavon)


Hain, Peter
Mudie, George






Mullin, Chris
Smith, Llew (Blaenau Gwent)


Murphy, Paul
Snape, Peter


Oakes, Rt Hon Gordon
Soley, Clive


O'Brien, Mike (N W'kshire)
Spearing, Nigel


O'Brien, William (Normanton)
Spellar, John


O'Hara, Edward
Squire, Rachel (Dunfermline W)


Olner, Bill
Steel, Rt Hon Sir David


O'Neill, Martin
Steinberg, Gerry


Orme, Rt Hon Stanley
Stevenson, George


Parry, Robert
Stott, Roger


Pearson, Ian
Strang, Dr. Gavin


Pickthall, Coin
Straw, Jack


Pike, Peter L
Sutcliffe, Gerry


Pope, Greg
Taylor, Mrs Ann (Dewsbury)


Powell, Ray (Ogmore)
Taylor, Matthew (Truro)


Prentice, Bridget (Lew'm E)
Timms, Stephen


Prentice, Gordon (Pendle)
Tipping, Paddy


Prescott, Rt Hon John
Touhig, Don


Primerolo, Dawn
Turner, Dennis


Purchase, Ken
Tyler, Paul


Quin, Ms Joyce
Vaz, Keith


Randall, Stuart
Walker, Rt Hon Sir Harold


Raynsford, Nick
Wallace, James


Reid, Dr John
Walley, Joan


Rendel, David
Wardell, Gareth (Gower)


Robertson, George (Hamilton)
Wareing, Robert N


Roche, Mrs Barbara
Watson, Mike


Rogers, Allan
Welsh, Andrew


Rooker, Jeff
Wicks, Malcolm


Ross, Ernie (Dundee W)
Wigley, Dafydd


Rowlands, Ted
Williams, Rt Hon Alan (Sw'n W)


Ruddock, Joan
Williams, Alan W (Carmarthen)


Sedgemore, Brian
Wilson, Brian


Sheerman, Barry
Winnick, David


Sheldon, Rt Hon Robert
Wise, Audrey


Shore, Rt Hon Peter
Worthington, Tony


Short, Clare
Wright, Dr Tony


Simpson, Alan
Young, David (Bolton SE)


Skinner, Dennis
Tellers for the Ayes:


Smith, Andrew (Oxford E)
Mr. Eric Martlew and


Smith, Chris (Isl'ton S & F'sbury)
Mr. Jon Owen Jones.


NOES


Ainsworth, Peter (East Surrey)
Brooke, Rt Hon Peter


Aitken, Rt Hon Jonathan
Brown, M (Brigg & Cl'thorpes)


Alison, Rt Hon Michael (Selby)
Browning, Mrs Angela


Mason, Rupert (Torbay)
Bruce, Ian (Dorset)


Amess, David
Burns, Simon


Ancram, Michael
Burt, Alistair


Arbuthnot, James
Butcher, John


Arnold, Jacques (Gravesham)
Butter, Peter


Ashby, David
Butterfill, John


Atkins, Rt Hon Robert
Carlisle, John (Luton North)


Atkinson, Peter (Hexham)
Carlisle, Sir Kenneth (Lincoln)


Baker, Rt Hon Kenneth (Mole V)
Carrington, Matthew


Baker, Nicholas (North Dorset)
Carttiss, Michael


Baldry, Tony
Cash, William


Banks, Robert (Harrogate)
Chapman, Sir Sydney


Bates, Michael
Churchill, Mr


Batiste, Spencer
Clappison, James


Bellingham, Henry
Clark, Dr Michael (Rochford)


Bendall, Vivian
Clarke, Rt Hon Kenneth (Ru'clif)


Beresford, Sir Paul
Clifton-Brown, Geoffrey


Biffen, Rt Hon John
Congdon, David


Body, Sir Richard
Conway, Derek


Bonsor, Sir Nicholas
Coombs, Anthony (Wyre For'st)


Booth, Hartley
Coombs, Simon (Swindon)


Boswell, Tim
Couchman, James


Bottomley, Peter (Eltham)
Cran, James


Bowden, Sir Andrew
Currie, Mrs Edwina (S D'by'ire)


Bowis, John
Curry, David (Skipton & Ripon)


Boyson, Rt Hon Sir Rhodes
Davies, Quentin (Stamford)


Brandreth, Gyles
Davis, David (Boothferry)


Brazier, Julian
Day, Stephen


Bright, Sir Graham
Deva, Nirj Joseph





Devlin, Tim
Kellett-Bowman, Dame Elaine


Dorrell, Rt Hon Stephen
Key, Robert


Douglas-Hamilton, Lord James
Kirkhope, Timothy


Dover, Den
Knapman, Roger


Duncan, Alan
Knight, Mrs Angela (Erewash)


Duncan-Smith, Iain
Knight, Rt Hon Greg (Derby N)


Dunn, Bob
Knight, Dame Jill (Bir'm E'st'n)


Durant, Sir Anthony
Knox, Sir David


Dykes, Hugh
Kynoch, George (Kincardine)


Eggar, Rt Hon Tim
Lait, Mrs Jacqui


Elletson, Harold
Lawrence, Sir Ivan


Emery, Rt Hon Sir Peter
Legg, Barry


Evans, David (Welwyn Hatfield)
Leigh, Edward


Evans, Jonathan (Brecon)
Lidington, David


Evans, Nigel (Ribble Valley)
Lilley, Rt Hon Peter


Evans, Roger (Monmouth)
Lloyd, Rt Hon Sir Peter (Fareham)


Evennett, David
Lord, Michael


Faber, David
Luff, Peter


Fabricant, Michael
Lyell, Rt Hon Sir Nicholas


Field, Barry (Isle of Wight)
MacKay, Andrew


Fishburn, Dudley
Maclean, Rt Hon David


Forman, Nigel
McNair-Wilson, Sir Patrick


Forsyth, Rt Hon Michael (Stirling)
Madel, Sir David


Forth, Eric
Maitland, Lady Olga


Fowler, Rt Hon Sir Norman
Malone, Gerald


Fox, Dr Liam (Woodspring)
Mans, Keith


Fox, Sir Marcus (Shipley)
Marlow, Tony


Freeman, Rt Hon Roger
Marshall, John (Hendon S)


French, Douglas
Marshall, Sir Michael (Arundel)


Gale, Roger
Marlin, David (Portsmouth S)


Gallie, Phil
Mates, Michael


Gardiner, Sir George
Mawhinney, Rt Hon Dr Brian


Garnier, Edward
Mayhew, Rt Hon Sir Patrick


Gill, Christopher
Mellor, Rt Hon David


Gillan, Cheryl
Merchant, Piers


Goodlad, Rt Hon Alastair
Mills, Iain


Gorman, Mrs Teresa
Mitchell, Andrew (Gedling)


Gorst, Sir John
Mitchell, Sir David (NW Hants)


Grant, Sir A (SW Cambs)
Moate, Sir Roger


Greenway, Harry (Ealing N)
Molyneaux, Rt Hon Sir James


Greenway, John (Ryedale)
Monro, Rt Hon Sir Hector


Griffiths, Peter (Portsmouth, N)
Montgomery, Sir Fergus


Grylls, Sir Michael
Needham, Rt Hon Richard


Gummer, Rt Hon John Selwyn
Neubert, Sir Michael


Hague, Rt Hon William
Newton, Rt Hon Tony


Hamilton, Rt Hon Sir Archibald
Nicholson, David (Taunton)


Hamilton, Neil (Tetton)
Norris, Steve


Hampson, Dr Keith
Onslow, Rt Hon Sir Cranley


Hannam, Sir John
Oppenheim, Phillip


Hargreaves, Andrew
Ottaway, Richard


Harris, David
Page, Richard


Hawkins, Nick
Paice, James


Hawksley, Warren
Patten, Rt Hon John


Hayes, Jerry
Pattie, Rt Hon Sir Geoffrey


Heald, Oliver
Pawsey, James


Heathcoat-Amory, David
Peacock, Mrs Elizabeth


Hendry, Charles
Porter, Barry (Wirral S)


Heseltine, Rt Hon Michael
Porter, David (Waveney)


Hicks, Robert
Powell, William (Corby)


Higgins, Rt Hon Sir Terence
Redwood, Rt Hon John


Hogg, Rt Hon Douglas (G'tham)
Renton, Rt Hon Tim


Horam, John
Richards, Rod


Hordern, Rt Hon Sir Peter
Riddick, Graham


Howard, Rt Hon Michael
Rifkind, Rt Hon Malcolm


Howell, Rt Hon David (G'dford)
Robathan, Andrew


Hughes, Robert G (Harrow W)
Roberts, Rt Hon Sir Wyn


Hunt, Rt Hon David (Wirral W)
Robertson, Raymond (Ab'd'n S)


Hunter, Andrew
Robinson, Mark (Somerton)


Jack, Michael
Roe, Mrs Marion (Broxbourne)


Jackson, Robert (Wantage)
Rowe, Andrew (Mid Kent)


Jenkin, Bernard
Rumbold, Rt Hon Dame Angela


Jessel, Toby
Sackville, Tom


Johnson Smith, Sir Geoffrey
Sainsbury, Rt Hon Sir Timothy


Jones, Gwilym (Cardiff N)
Scott, Rt Hon Sir Nicholas


Jones, Robert B (W Hertfdshr)
Shaw, David (Dover)


Jopling, Rt Hon Michael
Shepherd, Rt Hon Gillian






Shepherd, Richard (Aldridge)
Tracey, Richard


Shersby, Sir Michael
Tredinnick, David


Sims, Roger
Trend, Michael


Skeet, Sir Trevor
Trotter, Neville


Smith, Tim (Beaconsfield)
Twinn, Dr Ian


Soames, Nicholas
Vaughan, Sir Gerard


Spencer, Sir Derek
Viggers, Peter


Spicer, Sir James (W Dorset)
Waldegrave, Rt Hon William


Spicer, Sir Michael (S Worcs)
Walden, George


Spink, Dr Robert
Walker, Bill (N Tayside)


Spring, Richard
Waller, Gary


Sproat, Iain
Ward, John


Squire, Robin (Hornchurch)
Wardle, Charles (Bexhill)


Stanley, Rt Hon Sir John
Waterson, Nigel


Steen, Anthony
Watts, John


Stephen, Michael
Wells, Bowen


Stern, Michael
Whitney, Ray


Stewart, Allan
Whittingdale, John


Sumberg, David
Widdecombe, Ann


Sweeney, Walter
Wiggin, Sir Jerry


Sykes, John
Wilkinson, John


Tapsell, Sir Peter
Willetts, David


Taylor, Ian (Esher)
Wilshire, David


Taylor, John M (Solihull)
Winterton, Mrs Ann (Congleton)


Taylor, Sir Teddy (Southend, E)
Winterton, Nicholas (Macc'fld)


Temple-Morris, Peter
Wood, Timothy


Thomason, Roy
Yeo, Tim


Thompson, Sir Donald (C'er V)
Young, Rt Hon Sir George


Thompson, Patrick (Norwich N)



Thornton, Sir Malcolm
Tellers for the Noes:


Thumham, Peter
Mr. Gary Streeter and


Townsend, Cyril D (Bexl'yh'th)
Mr. Patrick McLoughlin.

Question accordingly negatived. nil

Mr. Peter Snape: On a point of order, Mr. Morris. I understand that, during the last debate, my involvement with a west midlands bus company was mentioned. I further understand that the hon. Member for Stamford and Spalding (Mr. Davies) was even less kind to me about my involvement with the bus company than he was to his sheep a couple of years ago. Will you, Mr. Morris, tell Conservative Members that the tradition of this House is that, if one hon. Member wishes to make a personal attack on another, he or she must notify that hon. Member first? Will you also pass that advice on to the Financial Secretary, who indulged in the same attack? I have no intention of going through the explanations that I have already given the House, and I have nothing to feel guilty about.

The Chairman of Ways and Means: I can confirm that any hon. Member who wishes to refer to another hon. Member should forewarn him that he wishes to do so.

Mr. David Shaw: I beg to move amendment No. 3, in page 69, line 44, leave out '£20,000' and insert '£30,000'.

The Chairman: With this, it will be convenient to discuss amendment No. 4, in schedule 15, page 269, line 44, leave out '£20,000' and insert '£30,000'.

Mr. Shaw: The purpose behind the amendment is to raise the limit on approved share option schemes from the £20,000 that was originally proposed to £30,000. The figure of £20,000 is too low to operate a wide-ranging share option scheme that brings in not just very low income earners, but some of the people who are just above very low income levels.
The House should bear in mind that the share options are held over a three-year period. We are not talking about something that can be allocated at a rate of £20,000 per annum, but a fixed sum for at least a three-year period. The £30,000 limit would include people who are above very low income levels, but fall well short of fat cats. I would describe some of the beneficiaries as young, hard-working, aspiring, low and middle-income cats rather than fat cats. Those who are working in early-stage and developing companies would also benefit. There has been a cross-party view in the House that high-technology companies should be encouraged.
I shall give three brief examples of the pressure that I have received from a number of people outside the House to raise the limit from £20,000 to £30,000. I know that my hon. Friend the Minister has received many representations. In the retail trade, the figure of £30,000 would cover both store supervisors and junior managers. In high-tech companies such as an Internet service company, where many American companies are often bidding for staff, the figure would cover the highly skilled junior staff.
Among the many letters that I have received on share options was one from a research scientist in a small biotechnology company in Kent. Such people would benefit from a raised limit. They are not big income earners, but they hold the United Kingdom's future in their hands. They will help to create and maintain the jobs of the future.
I hope that my hon. Friend can accept this minor amendment.

Mr. Jack: I am grateful to my hon. Friend the Member for Dover (Mr. Shaw) for the way in which he moved his amendment. He knows that our overall objective is to encourage companies to introduce schemes from which as many of their employees as possible can benefit and to encourage employees to participate in them.
The new tax relief for company share option plans must be seen in that context. The representations that we have received in response to my right hon. and learned Friend the Chancellor's invitation made it clear that there was demand for a third sort of scheme aimed at providing a more flexible way of granting options to modestly paid employees. That is what the new scheme is intended to do and that is why we initially pitched the limit on the value of options that could be granted at £20,000.
On the basis of what my hon. Friend said and the representations that we have received, I accept that it is sometimes difficult to set the right limit. We initially felt that the balance was about right but, like my hon. Friend, I received representations. The British Retail Consortium, the ESOPs Centre and the Society of Share Scheme Lawyers were among those who asked us to review the subject to see whether £20,000 was right. We did so and I have thought carefully about the representations.
I recognise the force of the broad range of arguments that have been advanced. As those who have made representations to us suggested, the limit might have been a shade too tight to allow middle managers to receive a significant quantity of options. The limit was aimed at middle managers. There was no attempt to push it higher, into the stratosphere, as Opposition Members suggested earlier.
My right hon. and learned Friend the Chancellor and I have concluded that it would be right to provide greater flexibility, which my hon. Friend the Member for Dover


adverted to, for the companies that want it, so that they might tailor the scheme to meet their needs and those of their employees. On that basis, I am prepared to recommend to the House that we accept my hon. Friend's—

Mr. Vivian Bendall: As a signatory of the amendment, may I thank my hon. Friend for making the opportunities open to a greater part of middle management?

Mr. Jack: I am grateful for my hon. Friend's endorsement of the line on which I was about to conclude by saying that I am prepared to recommend to the House that we accept the amendment.

10 pm

Mr. Darling: I wonder whether the Financial Secretary—as we are in Committee, he has an opportunity to do so—would tell us whether the Treasury has made an estimate of the cost of agreeing to amendment No. 3.
Does not the support for the amendment emphasise the truth of what we said earlier—that not only do the Conservatives oppose making schemes available to the many but, given the opportunity, they are prepared, inch by inch, bit by bit, to open all the doors that they said that they would close? What they are about is benefiting—

Mr. William Cash: Will the hon. Gentleman give way?

Mr. Darling: No, I will not. The hon. Gentleman has not been in the Chamber all night, and he need not expect to get in on the debate like that.
The Conservative party says that it intends to shut off loopholes and close down abuses, but the minute that it is subjected to pressure, it is prepared to start opening up the scheme. What is worse, when we table an amendment that is designed to ensure that the many are able to participate in schemes, Conservative Members vote it down. Given any opportunity, the Conservatives will choose to benefit as small a group of people as possible and deny opportunities to the many.

Mr. Jack: Sir Michael, let it be—[HON. MEMBERS: "Mr. Morris."] Mr. Morris, let it be known to every middle

manager in the country that the hon. Member for Edinburgh, Central (Mr. Darling) would not accept a modest change to the upper limit of the scheme—a change advocated by a broad range of outside interests and companies that have made representations to us. We listened carefully to what they said, and I have announced that I recommend that the amendment tabled by my hon. Friend the Member for Dover be accepted.
The hon. Member for Edinburgh, Central asked me two questions. First, he asked about the cost of the scheme. [Interruption.] Would the hon. Gentleman care to listen to the answer, as he asked the question? The answer, in this public expenditure survey, is zero. When the scheme comes in, we estimate that the costs will be about £10 million.
The hon. Member for Edinburgh, Central misleads the House when he says that we do not want the employee share option plan to be available to all employees. The difference between the hon. Gentleman and Conservative Members is that we believe that companies should have the choice to tailor the scheme to meet their needs. I remind the hon. Gentleman that, if some companies were confronted with the regime that he has advocated, they would not even contemplate having any schemes, which denies the object of his remarks.

Amendment agreed to.

Clause 105, as amended, ordered to stand part of the Bill.

Schedule 15

SHARE OPTION SCHEMES APPROVED BEFORE PASSING OF THIS ACT

Amendment made: No. 4, in schedule 15, page 269, line 44, leave out '£20,000' and insert '£30,000'—[Mr. David Shaw.]

Schedule 15, as amended, agreed to.

To report progress and ask leave to sit again.—[Dr. Liam Fox.]

Committee report progress; to sit again tomorrow.

Orders of the Day — Asylum Seekers

[Relevant documents: the First Report from the Social Security Committee, on benefits for Asylum Seekers (House of Commons Paper No. 81), and the Report of the Social Security Advisory Committee with the Statement by the Secretary of State for Social Security (Cm. 3062).]

Mr. Chris Smith: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Social Security (Persons From Abroad) Miscellaneous Amendments Regulations 1996 (S.I., 1996, No. 30), dated 11th January 1996, a copy of which was laid before this House on 11th January, be annulled.
I fear that we have a ridiculously short amount of time in which to debate a measure that will affect the life and livelihood of thousands of people. I know that hon. Members on both sides of the House wish to contribute to the debate, so I shall be brief.
I shall be urging my right hon. and hon. Friends to vote strongly against the regulations, primarily because they are simply inhumane. They will ensure that people who are in this country legitimately—many of whom have fled repression and torture—will receive no benefit whatsoever unless they submit their applications for asylum at the port of entry and prior to the first determination. The Government are seeking to introduce powers in the Asylum and Immigration Bill, which is also before the House, to remove child benefit as well. That will leave asylum seekers with no means of sustenance or support. Every time that we have asked how those people, who are legitimately in this country, will survive without any means of support, the Government have provided no answer. The Government are simply driving people—including children and the sick and disabled—into destitution.
We welcome the changes that the Government have made to the transitional arrangements, but that fundamental point about the regulations has not altered. I believe that, in bringing forward the regulations, the Government are forgetting the duties and decencies expected of a Government in a civilised country.
Government Members will say that most of those who seek asylum are bogus claimants; that is the case that the Government have made. That may be true of many claimants, but many more cases are not bogus and the genuine will suffer along with the rest. That is the problem with the Government's proposals. I suspect that the Secretary of State will refer tonight to the 90 per cent. of people, or more, who are refused refugee status.

Dame Elaine Kellett-Bowman: It is 96 per cent.

Mr. Smith: The hon. Lady is wrong, because the figure varies from year to year.
We should also remember that, every year, 25 per cent. of asylum applicants are granted refugee status or exceptional leave to remain because it is found that they have a genuine and legitimate reason to remain in the United Kingdom. For example, a Bosnian Muslim, who does not fear his Government but is nonetheless genuinely afraid to remain in his own country, would be likely to be granted exceptional leave to remain in this country. I

believe that his legitimate reason to remain in this country is every bit as strong as that of someone who is granted refugee status.
I am sure that we will hear another great untruth from Conservative Members tonight.

Mr. Ian Bruce: The hon. Gentleman has given the example of a Bosnian Muslim who is in genuine fear of his life. Surely that person will not turn up at the port of entry and say that he is on holiday or that he is visiting relatives and does not plan to stay for an extended period. As he is in fear of his life, he will state his problem at the port of entry and he will receive social security benefits because he has made that declaration.

Mr. Smith: I shall leave aside the obvious point that such a person might have been a student in this country or been here on holiday before circumstances in his country changed and forced him to apply for asylum. I shall turn to the issue of port of entry applications in a moment, because it is an important point. I accept that the hon. Gentleman may genuinely believe that people should make their applications at the port of entry, but I believe that he is wrong to do so. I will specifically address his point shortly, but I shall first address the other great untruth that the Government will doubtless tell us tonight—that the measure will somehow save the taxpayer some £200 million.

Dame Elaine Kellett-Bowman: On a point of order, Mr. Deputy Speaker. Is the hon. Member for Islington, South and Finsbury (Mr. Smith) allowed to use the word "untruth"? I thought that it was unparliamentary.

Mr. Deputy Speaker: I did not hear the word.

Dame Elaine Kellett-Bowman: He used it twice.

Mr. Deputy Speaker: Order. The word is not one that parliamentarians usually use. It is occasionally appropriate to a political party, but it is not usually acceptable in the Chamber.

Mr. Smith: I make no imprecation against the honour of Conservative Members, but I do against the honour of their argument, and that is what I am talking about. The Government tell us that the measure will save the taxpayer £200 million. It will not.
In 1994, 33,000 people lodged asylum applications, and among those were nearly 5,000 dependent children. If families are left with no livelihood, they will have to depend on emergency support from social services or on the local authority taking their children into care. It costs £45,000 a year to keep a child in local authority care. If fewer than 5,000 children are taken into care, that would wipe out entirely the supposed savings that the Government claim from the measure.

Mr. Michael Stephen: Is not the hon. Gentleman aware that, when the people he is talking about present themselves at the port of entry, they are questioned on their reasons for coming here? They have to satisfy the immigration authorities that they have means of support while they are in the country, either because


they have money themselves or have friends and relations here. Is he not being alarmist when he suggests that such people and their dependants will become destitute?

Mr. Smith: The hon. Gentleman completely mistakes the whole process of paying income support to someone. People are not entitled to receive income support if they have other means of income and livelihood, and that is the point at issue.
The Government have said that they are discussing with local authorities the level of the burden that the measure would place on them. But the Government have not told us whether they are going to pay the local authorities in full for the cost of taking children into care and making emergency social services payments. If the Government cover the local authorities' costs in full, they will not make any savings. If, however, they do not pay the local authorities in full, they will simply transfer expenditure from the Department of Social Security to the local authorities. That is, perhaps, why Westminster and Wandsworth, those great bastions of socialism, are still pursuing their application for judicial review of the Government's intentions.

Mr. David Shaw: Does the hon. Gentleman accept that the Social Security Select Committee took a lot of evidence on that issue of cost to local authorities? We heard many alarmist people who had all sorts of allegations about how little the measure would save and how children would be treated. But does the hon. Gentleman accept that no one suggested that local authorities were likely to take the children away from their parents and put the children into care at a cost of £45,000 a year each? Even the most alarmist local authorities—and they were going over the top—only suggested that they would keep the children with their parents and that any additional costs, at current prices, would be for housing the families.

Mr. Smith: Clearly, the hon. Gentleman was not awake during the proceedings of the Social Security Select Committee. If he looks at page xvii of its report, he will read:
The Association of London Government indicated a range of costs from £20,000 to £40,000 for looking after a child".
That association is a cross-party body, and it tackled the very point that the hon. Gentleman has raised. He speaks of alarmist organisations, but the list of bodies that gave a great deal of very good evidence to the Committee included: the Board of Deputies of British Jews, The British Medical Association, the chief adjudicator for immigration appeals, the Disability Alliance, the family service units, the Immigration Law Practitioners Association, and the Medical Foundation for the Care of Victims of Torture. I am just saddened that the hon. Gentleman seems not to recognise the validity of what they said.

Mr. Robert G. Hughes: rose—

Mr. Smith: The hon. Gentleman chaired the Committee and wrote the report, so I will give way to him—but this is the last time.

Mr. Hughes: If everything is so ghastly, and if the Select Committee has it all wrong, why did an equal number of Labour and Conservative Members vote in favour of the report?

Mr. Smith: I refer the hon. Gentleman to the vote in the Committee when it was proposed that it be

recommended that the Government withdraw these regulations. The Labour Members voted in favour, the Conservative Members against.

Dame Elaine Kellett-Bowman: Where does the report say that?

Mr. Smith: In the minutes.
There are, however, other arguments against these regulations. First, they fundamentally undermine the concept of appeal. There is a long and noble tradition in this country that an appeal gives a person the right to a further hearing. The first decision is not endorsed, and hence not fully valid, until the appeal has run its course. Yet the Secretary of State tells us in these regulations that an appeal effectively means nothing. Any case after the first determination will be assumed to be bogus. That, I believe, throws every judicial principle on its head and is deeply damaging to our notion of justice.

The Secretary of State for Social Security (Mr. Peter Lilley): Can the hon. Gentleman explain why successive Labour Governments have applied exactly the principle which he holds to be against natural justice to all British claimants who, on being refused a benefit, appeal against that rejection and are not given the benefit during the period of appeal?

Mr. Smith: The right hon. Gentleman has used that argument before: it is bogus. He is not comparing like with like. It is a fallacy to claim that an appeal against an asylum refusal and an appeal against a benefit decision are precisely the same.
Secondly, there is an assumption—this answers the point made by the hon. Member for South Dorset (Mr. Bruce)—on the part of the Government that an application made at the port of entry is more likely to be valid than one made afterwards. Common sense should tell the Secretary of State that that is not true. People fleeing from injustice, repression and torture, often after the trauma of a long and difficult journey and fearful of authority in the countries from which they come, have as the last thing on their minds when they first arrive here the idea that they must fill out forms and make their applications for asylum. They will be fearful of figures in authority, and it is very likely that they will be in great difficulty in terms of knowing where to go or who to consult.
I shall give Conservative Members, who seem to think that we are not talking about human beings but about statistics, an example. It was given to me by my hon. Friend the Member for Greenwich (Mr. Raynsford), who wrote to a Minister at the Home Office about a particular case just a few days ago. My hon. Friend wrote:
The above is a Kurdish refugee, who applied for asylum on 24th October 1995. three days after his arrival at Heathrow. He arrived at the weekend, and he speaks no English. He contacted the Kurdish Centre at the beginning of the next week, and they made an application for asylum on his behalf.
He has been imprisoned and tortured by the Iraqi regime. He is disabled, having suffered injuries as well as torture. He was arrested and tortured on two separate occasions, and fled because he was warned by his uncle that the Iraqi police were coming to arrest him again. He has had to leave his wife and children in Iraq. He is certain that if he is forced to go back he will be killed.


Under the Secretary of State's new proposals, if that applicant were to arrive after 5 February, he would not qualify for benefit payments. That is wrong. That is why we oppose the regulations.

Mr. Lilley: The case that the hon. Gentleman just mentioned—if the circumstances are as he says—evokes natural sympathy throughout the House. If someone in those circumstances arrives at a British port and is asked the purpose of his visit, what answer would he give? Surely it would be, "I've come here to seek refuge from persecution." It would not be to invent a story that he was here to visit someone, to substantiate that to the immigration officer and then demonstrate that he had the means to sustain himself while here.

Mr. Smith: But the Secretary of State completely misunderstands the sense of fear and desperation that is often felt by those who come here fleeing from repression. The last thing that they are likely to do, seeing a figure in authority, is immediately to reveal their entire life history. Very often they want to seek help and advice from others in their community. That is precisely what happened in this case. It is clearly a case where there is genuine need and where there is genuine fear of repression, but because of difficulties, which inevitably occur when someone arrives at a port of entry in this country, he made his application three days later. The Secretary of State should take that into account.
If common sense and plain ordinary decency do not move the Secretary of State, perhaps the figures will, because he told us a week or two ago that the approval rate for asylum applications from people who applied at the port of entry was greater than that for people who applied subsequently. The figures show that that is not the case.

Dame Jill Knight: rose—

Mr. Smith: I shall not give way, because I have given way many times and time is pressing on.
For the first 10 months of 1995, 4.8 per cent. of in-country applicants were approved for asylum. The figure for port applicants approved for asylum was 3.5 per cent. The pattern is exactly the same for each of the previous three years. The percentage who applied after they arrived at the port of entry but were approved for asylum—accepted by the Government as being genuine refugees—was higher than that for people who applied at the port of entry.
So when the Government tell us, as the regulations seek to do, that an application at the port of entry is somehow more genuine than one that is received after someone has arrived at the port of entry, they are wrong, and the figures show that they are wrong.
The Government also need to understand that the Social Security Advisory Committee, the body that they have established to advise them formally on social security matters, gave an unprecedented report rejecting wholesale the Government's proposed regulations. The Committee makes one further and telling point. It says:
We fully understand the Secretary of State's view that it is unreasonable to expect the UK taxpayer to support people whose reasons for coming to this country are purely economic.

That point I do not think anyone would dispute. But the Committee goes on to say:
However, it is clear to us from the evidence we have received that fair and expeditious immigration and asylum procedures are the best means of providing comprehensive and long-term arrangements to deal with these matters.
The Secretary of State is effectively making the social security system do the Home Office's job for it. If the Secretary of State really wants to reduce his expenditure, if he wants the taxpayer to spend less money supporting non-genuine claimants, he should not bring in regulations which harm the genuine claimants; he should speed up the assessment procedures. That is what we have been arguing for many months now. In fact, the Home Office is doing precisely the reverse at the moment. It is getting worse at it, rather than better.
Instead, the Secretary of State, no doubt anxious for a cheer at Tory party conference, has brought forward these deeply damaging proposals that will harm the good and the bad alike, that ultimately will not save money for the public purse, that fly in the face of reason and justice and that ought to be rejected by the House tonight.

The Secretary of State for Social Security (Mr. Peter Lilley): The hon. Member for Islington, South and Finsbury (Mr. Smith) began by saying that this was a ridiculously short debate. I am not aware of any representations from the Opposition for a longer debate or one earlier in the day—for the obvious reason that we all know that they are anxious to prove their credentials with readers of The Guardian and show that they are against these changes, but they do not want people in the country to know that they are against them. That is why they have let the debate go through late at night.
I, by contrast, am happy to have a debate at any time, and chose to make a public statement before the House rather than by written answer as would be normal. The Opposition are strong on hypocrisy today, and we are strong on the causes of hypocrisy, as my right hon. Friend the Prime Minister said.
As I said in my statement in the House, the regulations, together with the changes that my right hon. and learned Friend the Home Secretary is bringing in the Asylum and Immigration Bill, have three aims. The first is to ensure that the United Kingdom remains a safe haven for those genuinely fleeing persecution. The reason genuine refugees come to the United Kingdom is to share our freedoms, not to obtain our benefits. Their rights to asylum will not be altered in any way, and anyone arriving as a refugee and claiming asylum at the port of entry will continue to have access to benefits while the Home Office determines the claim.
The second objective is to deal more speedily with genuine claimants so that they can get on with their lives. The Home Office has already increased the number of caseworkers sevenfold since 1988, and an extra £37 million is being transferred from my budget to the Home Office and the Lord Chancellor's Department to expand their asylum work further over three years.

Mr. Keith Bradley: The situation has got worse.

Mr. Lilley: Of course it has got worse, because the number of claimants has continued to rise inexorably.
That is why we have to act on the attractions of asylum through the benefit system as well as through the procedures in the Asylum and Immigration Bill.
The only other way of acting on the number of claimants is through taking measures to adjust the benefit arrangements and discourage the growing number of unfounded benefit and asylum claims which clog up the system to the disadvantage of genuine claimants. That is our third objective. The benefit reform contained in the regulations is essential to achieve that end.

Mr. Max Madden: There can be no doubt that the regulations will ensure that, in February rather than January, large number of asylum seekers will be left destitute and homeless. Leaving that aside, however, may I ask what justification there is, when benefit is being denied, for continuing to prohibit asylum seekers from seeking or obtaining employment for at least six months after they have submitted their asylum claims? If the main purpose of the regulations is to reduce public expenditure, surely it would be best to enable asylum seekers to seek employment immediately after the submission of the claims.

Mr. Lilley: Under all Governments, the practice has been not to let asylum seekers work during the first six months. One of the reasons why people come to this country pretending to be asylum seekers when they are, in fact, economic migrants is that they want to work here. Most countries do not allow asylum seekers to work at all; we give them that right after six months.
The rising tide of asylum seekers represents a major problem that no responsible Government could possibly ignore. Last year, the total number of people claiming asylum in the United Kingdom, including dependants, exceeded 57,000. In the previous year, the figure was 42,000. That, in turn, was a tenfold increase over the past 10 years. Yet, in the same period, the increase in the number of asylum seekers on the continent was less than threefold. Britain's share of all the asylum seekers coming to Europe has trebled over the last decade. Moreover, since 1994 the number of claims has fallen by a third on the continent, whereas in 1994 it rose by 45 per cent., and there was a further 35 per cent. increase last year.
Amnesty International agrees with us, saying:
The truth of the matter is that, since 1992, immigration controls and asylum procedures—particularly those applied at the border—have been tightened far more in some European countries than in the UK … This … no doubt works to make the UK a more attractive destination to would-be asylum-seekers than some other European countries.
France and Belgium, for example, offer no benefits to any asylum seeker after 12 months. Italy offers no benefits to any asylum seeker at all, and as a result only 1,800 people have bothered to claim asylum there. Germany and Holland accommodate asylum seekers in camps, giving benefits mainly in kind rather than cash.
The simple fact is that the growth in the number of claims reflects a huge increase in economic migration, rather than an increase in the number of people fleeing from genuine persecution. The overwhelming majority of claims for asylum turn out, on examination, to be unfounded. Fewer than 7 per cent. of claimants are eventually given refugee status, including those who are

successful on appeal. We are, in effect, spending £200 million a year—that sum is rising rapidly—over 90 per cent. of which goes to people who are not political refugees at all.

Ms Diane Abbott: Is it not misleading to talk of 7 per cent., or 4 per cent., of people eventually being given refugee status? Another 14 or 15 per cent. are given exceptional leave to remain, and those of us who have dealt with refugee cases know that it is almost as hard to obtain exceptional leave to remain as it is to be recognised as a refugee.

Mr. Lilley: I shall deal with the question of exceptional leave to remain in a moment. [Interruption.] I shall give my speech in my own way, and without further interruptions.
None the less, under the regulations, those who arrive in this country claiming to be refugees will remain entitled to benefit while the Home Office assesses their claim.

Mr. Nick Raynsford: Will the Secretary of State give way?

Mr. Lilley: I shall make a little progress, if I may, if only to please the hon. Member for Blackburn (Mr. Straw).
We must recognise, however, that 70 per cent. of claims in this country are made by people who entered the country claiming to be students, tourists, visitors or business people. They had to convince the immigration officers that that was so, and that they had the means to support themselves when in this country. They accepted that they could not be a burden on public funds. Subsequently, they change their story and claim asylum. Under the present system, they are then entitled to receive benefits. In future, those who change their story will not be entitled to benefits. We will hold them to their original assurances, unless there has been an upheaval in the country from which they have come since they left it.

Mr. James Couchman: Does my right hon. Friend agree that, although people may use all sorts of devious ways to get out of countries where they fear persecution, there is no need for them to lie at the port of entry when they come here? If they throw themselves at the mercy of people at the port of entry and tell the truth, they are much more likely to be believed to be genuine asylum seekers.

Mr. Lilley: My hon. Friend makes a good point. The reason that genuine claimants come to this country and flee a country in which they are being persecuted is that they know that we are a haven of freedom. They come here because they trust our authorities, not because they distrust us. If they did distrust them, they would go somewhere else.

Mr. Raynsford: Will the Secretary of State give way?

Mr. Lilley: If the hon. Gentleman will permit, I will make some further progress.
We shall change the rules affecting asylum seekers to put them on the same basis as British citizens who are not entitled to benefits while appealing against rejection of a


benefits claim. As I said in my intervention on the hon. Member for Islington, South and Finsbury, successive Governments, including Labour Governments, have treated benefit claimants in this country in that way, and he did not come up with any specific reasons for distinguishing between British claimants appealing against rejection of benefit, and asylum claimants appealing against rejection of their asylum claim and against not being allowed to receive benefits during that period.

Ms Glenda Jackson: May I give the Secretary of State two specific areas where a marked difference exists between an asylum seeker being denied benefits and a British national being denied them? I do not want to get into the ethical difference between seeking asylum and claiming benefits, but surely the most salient differences are, first, that an asylum seeker probably does not speak English and, secondly, that he or she will have no family, friends or support to assist while waiting for the application to be processed.

Mr. Lilley: That is not the case. The vast majority have contacts over here and, of course, by the time the question of appeal comes up, they have been found not to be genuine refugees. If they choose to pursue that claim, fair enough, but the present system encourages virtually everyone to appeal. If we had such a system internally, virtually everyone would appeal. As it is, only a small minority of British claimants whose application for a benefit is rejected, appeal. A large majority of their appeals are upheld by the tribunals because only those with a good case bother to appeal. The vast majority of asylum claimants appeal and 96 per cent. of those appeals are found to be unfounded. It cannot be right to continue virtually to pay people to make appeals, the large majority of which are bogus.

Mr. Raynsford: The Secretary of State will recall that, in his speech, my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) highlighted a case, in which I have been involved, of a refugee who suffered torture and horrendous experiences in Iraq. On arrival in the United Kingdom, speaking no English, confused and unaware of the procedures, he did not make an immediate claim for asylum, but he did so three days later when advised by the friends with whom he had come to stay to seek safety from persecution. If the right hon. Gentleman has any humanity, how can he claim that that person is a bogus refugee?

Mr. Lilley: The hon. Gentleman obviously did not hear my earlier intervention. He has failed to answer the question why, if all the circumstances he cited are correct, the person concerned—we all sympathise with that person—answered dishonestly the questions put to him by the immigration official.

Mr. Raynsford: Because he does not speak English.

Mr. Lilley: But the Home Office makes available translation and interpretation services in more than 100 languages, including Arabic. There is no question but that the person concerned could have made himself understood. He would have had to do so to convince the immigration officer that he was here as a student, if he said that he was a student; as a visitor, if he said that he was a visitor; as a business man, if he said that he

was a business man. He would have had to be able to convince the immigration officer that he had the means to support himself while in this country. Did the hon. Gentleman even ask the person those questions?

Mr. Raynsford: Of course I asked those questions when the man came to my surgery with an interpreter. He explained, through an interpreter because he spoke no English, how he arrived in a foreign country in a state of terror, fleeing from persecution, and said that he had come to stay with his relatives and friends. He made an application for asylum later. It is a genuine case, and he should not be penalised by the regulations.

Mr. Lilley: It has emerged that the man had friends and relatives to support him, and that he convinced the immigration officer that that was so. That is satisfactory for him—[Interruption.] I am trying to deal with the general point about claims made in-country versus those made at the port.
It is nonsense to suggest that people fail to claim at the port because they do not know the rules. No one needs to know the rules; nor do people need to know English. There are interpretation facilities at the port. All they have to do is tell the truth when asked by the immigration officials at the port to give their reasons for coming to this country. If they say that they are fleeing persecution and they want asylum, they will subsequently be allowed to claim benefit while pursuing that claim.
If, however, they say that they are here to study, to visit relatives, as tourists or on business, they will have to convince the immigration authorities of that. They will be asked to show that they will be able to support themselves, and they will have to convince the immigration officials of that. They will probably be asked where they will stay, and they will have to provide information about that. They will probably be asked to show that they have a return ticket or the means to buy one.
People do not accidentally give the wrong answers to those questions. Of course, most of them answer honestly, and at the time they entered the country they did intend to come for those reasons, perhaps with the thought also of seeking asylum. On the other hand, that might not have been in their minds, but subsequently it was put into their minds. Quite a substantial number do not make the asylum claim until the end of their period of entitlement to stay or until they have overstayed.

Mr. Chris Smith: If that is the case, can the right hon. Gentleman tell us why, year after year after year, a higher proportion of applicants for asylum who apply after they came into the country are awarded refugee status than applicants who applied at the port of entry?

Mr. Lilley: That is not invariably the case. The numbers are small—

Mr. Jack Straw: In every year?

Mr. Lilley: No, not in every year.

Mr. Smith: rose—

Mr. Lilley: I am answering the previous point.
The numbers accepted as refugees are small indeed, whether the claim is made afterwards or at the port. We are talking about the difference between very small percentages. If my recollection is correct, in 1994—the last full year for which we have figures—the proportion claiming in-country who were eventually given refugee status was smaller than that at the port.

Mr. Smith: I have to say that the Secretary of State is incorrect for the years 1992, 1993, 1994 and 1995. He says that we are talking about very small numbers of people. There were 670 last year, 530 the year before that, 1,260 the year before that and 705 the year before that. The Secretary of State's figures are incorrect.

Mr. Lilley: The hon. Gentleman is confusing percentages and absolute numbers. The fact is that the majority of people at present do claim in-country, and the majority of people who are eventually accepted claim in-country.

Mr. Smith: Will the Secretary of State give way?

Mr. Lilley: I will not give way to the hon. Gentleman, who cannot tell the difference between percentages and numbers.

Mr. Smith: rose—

Mr. Deputy Speaker (Mr. Michael Morris): Order. The hon. Member for Islington, South and Finsbury (Mr. Smith) can see when the Secretary of State is giving way and when he is not.

Mr. Lilley: The—[Interruption.]

Mr. Deputy Speaker: Order. Did I hear the hon. Member for Tottenham (Mr. Grant) suggest that an hon. Member was bogus? If so, I hope very much that he will withdraw that comment.

Mr. Bernie Grant: I said that the Secretary of State's arguments were bogus.

Mr. Deputy Speaker: I am most grateful.

Mr. Lilley: The simple fact is that, since we announced the changes, the proportion of people choosing to claim at port rather than in-country has suddenly risen. One of the reasons people previously claimed in-country is that such a claim makes it more difficult subsequently to remove a person, as he will have to be subject to deportation procedures. Those claiming at port are easier to remove, as they are subject only to removal procedures. There was a positive advantage for people to claim in-country, apart from any desire to get benefit.
The change that we have made—even if people have to some extent circumvented it for benefits—will bring about greater honesty and clarity at ports, and will mean that people will not claim an artificial advantage by entering the country before they subsequently make their claim.

Ms Glenda Jackson: Will the Secretary of State give way?

Ms Abbott: Will the Secretary of State give way?

Mr. Lilley: I have given way to a great number of hon. Members and I shall make some progress, if I may.
A number of critics of the changes that we have made have tried to suggest that the bulk of asylum seekers whose claims are rejected are not really bogus. The hon. Member for Liverpool, Mossley Hill (Mr. Alton) and his party's spokesman in another place, Lord Russell, have said that we are dealing not with bogus claims but with bogus refusals. They have claimed that the Home Office has in some way tightened up the definition of asylum seekers. That is simply and palpably untrue.
The definition used to define a refugee is laid down in international law by the Geneva convention and has not changed. Decisions made by Home Office officials are justiciable and can be taken to a further stage of appeal, and that is to a legal body and not a Home Office body. A case can be taken to a further judicial review if it is felt that the law is not being applied correctly. In 96 per cent. of cases where there is an appeal to a higher authority, the Home Office decision is upheld. There is no evidence that the Home Office is not interpreting the rules properly or correctly.

Mr. David Alton: The Secretary of State will accept that Canada is not entirely parallel to the UK for these purposes, but will he reflect that only 4 per cent. of cases in this country are judged to be convention refugees, whereas in Canada 70 per cent. of those who apply are accepted for convention purposes? Does that—and the even more significant comparisons that can be made with other EC countries—not demonstrate that we receive far fewer people as convention refugees because of the way in which we choose to interpret the rules?

Mr. Lilley: The hon. Gentleman has chosen an exceptional country for an example, and he will know that the position in most other European countries is rather similar to that in this country—the rates of refusal and rejection are fairly similar.
The hon. Member for Islington, South and Finsbury suggested that the bulk of asylum seekers should be considered as refugees. Another body, Asylum Aid, wrote to the Evening Standard to suggest that most refugees have
fled imprisonment or the threat of death at a moment's notice, often with only the clothes they stand up in.
That is scarcely ever the case. To get to this country, it is usually necessary for people to get a visa in the first place. Hon. Members will know that that is not a speedy or an easy process. It often involves more than one visit to the British entry clearance officer in the country of origin and obtaining information from here before they arrive in this country. To suggest that people are arriving suddenly and unexpectedly, because of a knock on their door in the night, and that they have only the clothes they stand up in is untrue.
In this country, as in most other countries, we face a major problem because of the rising flow of economic migrants using the asylum procedures, which were set up for quite different purposes. We have to cope with that problem—any Government would have to try to cope with it—and there are only two ways to do so.
One way is to speed up the procedures, by using the improvements in the Asylum and Immigration Bill, which is going through the House. The other is to reduce the


attraction of benefits. The Opposition have opposed both measures, as they have opposed every attempt by the House to update immigration and asylum procedures. Their approach is fundamentally irresponsible. It does not even meet the needs of genuine asylum seekers, who are the principal sufferers from a system that puts them in the long queue that is created by tens of thousands of bogus asylum seekers.
We have to take action; we have taken action. The measures that we have taken are sensible, well judged and, in the case of appeals, they parallel the treatment that we already give to British citizens. The changes are in the ultimate interests of genuine refugees and of good race relations in this country, and I commend them to the House.

Ms Liz Lynne: I am pleased that we have had a chance to debate these regulations. That was due to my hon. Friend the Member for Liverpool, Mossley Hill (Mr. Alton). Without him they would already have been put into practice.
I am glad that the proposed changes were examined in detail by the Social Security Advisory Committee, which took evidence from 225 individuals and organisations, from Shelter to the British Medical Association, Disability Alliance, Maternity Alliance, church groups and local councils—of all political persuasions, I hasten to add.
The SSAC concluded that the Government's proposals should not proceed, and stated:
We do not believe that it is acceptable that a solution should be sought by putting at risk of destitution"—
"destitution" is the word the committee used—
many people who are genuinely seeking refuge in this country, amongst whom may be numbered some of the most vulnerable and defenceless in our society".

Mr. Stephen: Does the hon. Lady recall that my right hon. Friend the Secretary of State said that, to get into the country in the first place, the persons to whom she refers would have to satisfy the immigration officer that they have the means to support themselves while they are here? No question of destitution can arise.

Ms Lynne: I do not think that the hon. Gentleman can have heard me. I was quoting the report of the Social Security Advisory Committee, which is hardly an anti-Government body—the chairman and members were appointed by the Secretary of State. Does the hon. Gentleman not realise that? But still the Government will not listen—even though that committee's main function is to advise on social security regulations.
The people who support the regulations falsely claim that anyone who applies in-country is bogus. That claim is based on ignorance of the difficulties and the real trauma that asylum seekers have gone through before they get to this country. Many asylum seekers are ignorant of immigration law and the benefit rules. It is hardly surprising that they turn to friends, relatives and organisations for advice before going to Government officials. Often they were frightened of such officials in their own countries.
Most asylum seekers apply within a few days. Some come in on false passports because they cannot get genuine papers in their countries. A study by the Refugee

Council showed that 42 per cent. of those who apply for asylum in this country applied on the same day; 8 per cent. within one day; and 31 per cent. within one week. Those are not people who have come to Britain on visitors' visas, stayed for six months, decided that they like the country and applied for political asylum; they are genuine refugees. I do not doubt that there are some people who do that sort of thing. They have to be dealt with quickly and, if they are bogus, they must be dealt with accordingly and sent back to their countries.
We are talking about genuine asylum seekers. The Home Office granted large numbers of genuine asylum seekers permission to come into the country. Between 1992 and 1994, there were 2,495 cases of refugees who applied for asylum in-country, compared with 1,040 who applied at the port of entry. It is more common for genuine asylum seekers to apply in-country.
If the regulations were in place, those 2,495 people could not have had income support, housing benefit or council tax benefit. They would have been destitute. The regulations will, in time, lead to thousands of asylum seekers sleeping rough without any means of support. Think of the human costs—they will hit families with children, disabled people, torture victims and elderly people.

Mr. Alan Howarth: Does the hon. Lady recall that Ministers spent a lot of time last year explaining how much they deplore discrimination against disabled people? Is she surprised that they now plan to discriminate in the benefit system against disabled people who happen to be asylum seekers? Does she agree that the Government's xenophobia will not be tolerated by the British people, who will not accept the destitution and suffering that this policy will cause?

Ms Lynne: I could not agree more. Disabled people will suffer along with the elderly and children. Many of those children will be taken into care because they have to be under the Children Act 1989. What will be the cost? How much more money will the Government give local councils to help them with the bill for taking those children into care? If they are not taken into care, what will happen to them? They will be on the streets. [Interruption.] There are beggars on the streets now, but once the regulations come into force, there will be more of them, and families, disabled people and children will be on the streets.

Ms Glenda Jackson: Clearly, Conservative Members are not prepared to listen to the hon. Lady's argument, which is based on fact. Perhaps they will take the word of Oxfam, which is preparing to set aside 47,000 sq ft of its ubiquitous black plastic and emergency food rations to assist refugee organisations and the Churches to provide the most meagre shelter for those people, who, under the regulations, will become absolutely destitute and be put on to our streets. Is it likely that Oxfam, an organisation that is overstretched dealing with major human disasters around the world, would be playing games if there were not a real need for such assistance?

Ms Lynne: It is not likely at all, and nor is it likely in respect of all the other organisations that are playing their part, or the Churches that have warned that there will be destitute families. They are not anti-Government organisations or people out to get the Government. They


are genuinely concerned about children and families who will become destitute. Ultimately, it will lead to many unjust refusals and a breach of the convention on refugees.
Last year, 95 men and women had their initial refusal overturned. Under these regulations, they will have no right to benefit while waiting to appeal. It takes on average 18.4 months for a case to be fully resolved; the initial decision takes on average 8.7 months. What are those people supposed to do? How are they supposed to live? What are the 3,333 people who have been waiting for five years and the 23,000 who have been waiting since 1993 supposed to do? The Government should be speeding up the appeals procedure if they want to cut the social security bill. Had those people not been entitled to benefit, they, too, would have been out on the streets. Do the Government expect local authorities to pick up the tab?
Perhaps the Secretary of State will tell us when replying to the debate where the appeal papers will be delivered. Will they turn up in a box somewhere underneath the arches? How will the people concerned be found? It will be an administrative nightmare. Even if somebody is granted leave to enter this country and the Home Office appeals against it, he or she will still receive no benefit until the appeal is heard.
We need a fair refugee procedure, which must include appeal and a means to support those people during the appeal procedure. I hope that the Secretary of State will change his mind before it is too late, in the name of humanity.

Mr. Robert G. Hughes: The speech by the hon. Member for Rochdale (Ms Lynne) had all the authenticity and voracity that one would expect from a Focus newsletter, which is not saying much.
The Social Security Select Committee's report on benefits says:
The Committee shares the widespread view that the growth in the number of unfounded asylum claims, and their cost to the taxpayer, is a serious problem that the Government is right to tackle.
There must be a starting point. Some of the Opposition's comments so far would lead us to believe that they did not understand that. Outside this Chamber and its hothouse atmosphere, however, many people of all parties understand it. The general public also understand it, which is why they will welcome the regulations that my right hon. Friend the Secretary of State has tabled.

Mrs. Maria Fyfe: Will the hon. Gentleman give way?

Mr. Hughes: I shall give way just a couple of times.

Mrs. Fyfe: I count myself fortunate.
Is not the hon. Gentleman embarrassed that the Churches must now revert to the role that they fulfilled before the introduction of the welfare state—ensuring that people do not go hungry and have some kind of shelter?

Mr. Hughes: If that were true, I would. We heard all the evidence presented by the hon. Member for Rochdale. We

heard the destitution arguments, but they did not stand up to proper examination. Had my right hon. Friend not made the changes that he announced in his statement of 11 January, the 13,000 people who had been on benefit and whose benefit would have been cut off would have been in a difficult position. I recognise that and assume that it is why my right hon. Friend took that correct step.
But let us be clear: none of those people will be in a position that is different from what they expected, or the position that they declared themselves to be in, because they have declared that they will not be a burden on the state and that they recognise that they will not be eligible for social security benefits. That will continue to be the position.
I have no doubt that, when the regulations are introduced, we shall see some of the typical shroud waving that we have come to expect. We shall see some hard cases paraded, but the question that people have to ask is whether they needed to be hard cases at all, or whether they are being paraded as a gimmick to try to discredit what the Government are doing.

Ms Abbott: Clearly, the hon. Gentleman is unmoved by what he describes as the destitution argument. Is he interested at all in our obligations under international law? We are obliged to give such people rights of appeal. What sort of right of appeal is it if, for the 18 months or perhaps two years that people have to wait for their appeal, they have no means of support? The Opposition believe that the proposals may be within the letter of our international obligations, but they are clearly outside the spirit of our obligations under international law.

Mr. Hughes: I believe that to be complete nonsense. There is no justification for the very wide-ranging point that the hon. Lady has made. As my right hon. Friend stated in his opening speech, people need not be in that position.

Mr. Alan Howarth: The fourth paragraph of the summary of conclusions of the Select Committee's report provides an endorsement of the Government's view that they are acting in accordance with their obligations under international law. But will the hon. Gentleman make it absolutely clear to the House that it was the Tory majority on the Select Committee that ensured that its report goes so far to endorse the Government's policy?
The proceedings of the Select Committee record a series of far-reaching amendments, tabled by my hon. Friend the Member for Islington, North (Mr. Corbyn) but defeated in Divisions. As a member of the Select Committee, I concur completely with my hon. Friend the Member for Islington, North and I greatly regret that the Select Committee's report fails to acknowledge the Government's betrayal of our liberal and humane tradition. The Government's policy will create fear and destitution; it will break up families and be racially divisive, and I abhor it.

Mr. Hughes: I say two things in response to that intervention. I do not wish to ruin the career of the hon. Member for Islington, North (Mr. Corbyn), but I have the highest regard for his integrity. He tabled the amendments entirely in line with the policies that he has always espoused. It is perfectly right for him to do that.
The views of the newly arrived Labour Member would carry more credibility if he had bothered to stay until the end of the proceedings and vote against publication of the report.

Mr. Alan Howarth: The hon. Gentleman is well aware that I made it entirely clear during the proceedings that I utterly deplored the tenor and thrust of the report. He well knows that I had to be in the Chamber at the end of the proceedings and could not be available to record my vote.

Mr. Hughes: I think that the hon. Gentleman has an argument with the Hansard reporters, because the point of order that he told us that he was leaving the Committee to make does not appear in the copy of Hansard for that day—

Madam Deputy Speaker (Dame Janet Fookes): Order. It would be appropriate if hon. Members addressed the subject matter in hand.

Mr. Hughes: I turn to the point that has been raised about presenting oneself honestly at the port of entry. In the sixth paragraph of the Select Committee report we recommend that there
should be access to appropriate and independent legal advice for all asylum applicants.
That is important. There is a project looking into work at ports of entry and I hope that my right hon. Friend the Secretary of State will consider the work carried out there to find out whether anything can be done to ensure that the advice is correct, appropriate and available.
One of the differences between the Select Committee and the Social Security Advisory Committee is that Members of Parliament have constituencies and see the cases that come before them. That is bound to make a difference to the way in which they view the subject. Of course, we see the cases where someone has come to this under one guise, stayed on under another guise and then sought asylum—not necessarily with a good reason for doing so, but merely to prolong his or her stay in this country. As a bonus, they are doing so at the expense of the taxpayer. It is time that that stopped, and that is one of the reasons why I welcome the new regulations.

Sir Ivan Lawrence: rose—

Mr. Stephen: rose—

Mr. Hughes: I give way to my hon. and learned Friend the Member for Burton (Sir I. Lawrence).

Sir Ivan Lawrence: My hon. Friend would notice another difference between the conclusions of the Social Security Select Committee and the conclusions of the Social Security Advisory Committee. The SSAC, having said that the position presents a
serious and very difficult problem for the Government",
recognises that
under the current system benefits may be paid, sometimes for years, to people without foundation
and that
it is unreasonable to expect the UK taxpayer to support people whose reasons for coming to this country are purely economic",

provides no solution to the problem that confronts the Government.

Mr. Hughes: That indeed is one of the differences.
In previous debates, we were asked to believe that people who fled from the dreadful tyranny of the old regime in South Africa or of Nazi Germany, having found it necessary to use forged passports and documents and to lie to get into this country, would never have been admitted into this country if the regulations before us had been implemented. That is nonsense, and it is insulting to the people who are spoken of.
It is talking nonsense to say that someone fleeing from Nazi Germany, or one of the leaders of the African National Congress, having gone to all that trouble, having obtained the papers and come to this country, would lie on arrival at the port of entry. Those people would declare themselves honestly, and everyone knows it in their heart.

Ms Glenda Jackson: Will the hon. Gentleman give way?

Mr. Hughes: I have given way enough, and other hon. Members want to take part.

Ms Jackson: It is very short.

Mr. Hughes: I have heard that from the hon. Lady before, and it has not been true. The fact is—[Interruption.]

Madam Deputy Speaker: Order. The House knows the rules full well. If the hon. Member who has the Floor does not give way, other hon. Members must resume their seats.

Mr. Hughes: The message will travel back to people who intend to come to this country correctly and appropriately seeking asylum, that to seek asylum in the United Kingdom, it is now necessary to do so at the port of entry. Those people will understand that, and that is what they will do.
The bloodcurdling speech by the hon. Member for Islington, South and Finsbury (Mr. Smith) was designed to ride two horses. The Labour party knows that it cannot control its left wing unless it makes bloodcurdling speeches against this measure, but it knows that the bulk of its support, and most people in the country, support the measures that my right hon. Friend proposes.
Once again, it is middle-class left wingers, espousing one policy but believing in another. It is the type of "Harmanising" that we have come to expect from the Labour party.

Mr. Frank Field: I shall be brief, as many hon. Members have constituency interests in this subject.
The Secretary of State is no doubt seething with anger tonight. He has every reason to feel that way. He knows that he has been stitched up by his Cabinet colleagues, because the Government have slowly woken up to a fact that the country has known for some time—the Home Office is in a shambles. The Home Office is unable to


protect our borders—one of its most important duties. Because of its inability to carry out that function, the Secretary of State has been cornered and forced to introduce those regulations and use the social security system as a means of controlling entry to the country because the Home Office has failed.

Mr. Lilley: I thank the hon. Gentleman, and the Social Security Select Committee that he chairs, for joining me in being stitched up and approving of the measures that I have just introduced.

Mr. Field: It is a pity, given that the Secretary of State thinks that the Committee gave a great deal of support to him, that he did not bother to comment on, agree with and support one of its recommendations—that those authorities at the point of entry, such as Dover and others in London, should not be obliged to foot the cost of the changes that central Government are introducing tonight. The Select Committee report recommended that local authorities be reimbursed fully for the additional costs associated with the changes that we are debating. I shall willingly give way to the Secretary of State to allow him to confirm that that is Government policy.

Mr. Lilley: I announced in my statement that we are discussing with local authorities ways in which we can make a substantial contribution to the unavoidable costs that they will incur as a result of the changes. There will be a meeting with local authorities later this week to discuss the matter. That seems a sensible course of action. The House has made representations that the Government should not cover 100 per cent. of the cost, as there should be some incentive for local authorities to economise in the measures that they introduce. Even Westminster has recognised that it should not be 100 per cent. cost recovery.

Mr. Field: As to my first point, the House will note that the Secretary of State has peeled himself away from the recommendations in the Select Committee report.
I repeat that we have crossed a threshold tonight. Even if we disagree with the policy, the Secretary of State has a reputation for running his Department. This is the first time that he has had to come to the Dispatch Box and introduce changes which prove that he has been overwhelmed by his colleagues. The DSS must now bring forward policies because the Home Office cannot manage it.
During the debate, the Secretary of State and his hon Friends have said repeatedly that, if we could control the point of entry more effectively, we would not need the regulations. He knows that the Government cannot deliver on that score: hence we have the regulations.
I refer also to the question of fraud. The Secretary of State did not comment on that. My hon. Friend the Member for Tottenham (Mr. Grant) said that many of the figures on which the Secretary of State based his argument tonight are bogus. He will know that the Select Committee is conducting a major inquiry into benefit fraud, including housing benefit fraud and the way that landlords rip off taxpayers. Thankfully, we have almost reached the point where we have only to announce that we are undertaking a fraud inquiry for the Secretary of State to introduce tightening-up measures.
During our inquiry into housing benefit fraud, some of the most effective anti-fraud officers gave evidence before the Select Committee. They pointed out that the Government are so slipshod in administering the national insurance system that there are about 10 million or 20 million more numbers than people in this country. They said that many of those national insurance numbers are being used by people who profess to be asylum seekers in order to register false claims for benefit.
In our report, we suggest that the Secretary of State should respond to that serious abuse by setting up a task force so that we can determine quickly and with some certainty whether the figures showing an increase in the number of asylum seekers—from which the Secretary of State made such capital tonight—are real or bogus. We must determine whether the figures are based on the gangs that are operating in this country and milking the social security system of vast sums of money. Although the Secretary of State claims that the report lent him much support, it is significant that he was not anxious to comment upon that recommendation.
In conclusion, we have crossed a threshold tonight. For the first time that I can remember in his present stewardship, the Secretary of State has sold out his Department. He has put the requirements of the Home Office before his responsibility for running a social security system which meets need. Although he talks bravely and he sometimes acts effectively against fraud, he has done very little to follow up our recommendation. He should look carefully at the way in which gangs of people are claiming to be asylum seekers and boosting the figures, when they are simply ripping off the social security budget and the taxpayers.

Mr. Peter Brooke: It is always a pleasure and a privilege to follow the hon. Member for Birkenhead (Mr. Field). I always seek to be brief, and on this occasion I shall, perforce, need to be. I do not think that a 90-minute debate does justice to this subject, but that must be laid at the door of the usual channels.
First, I must express my appreciation to my right hon. Friend the Secretary of State for the personal trouble he went to in explaining the Government's policy to me. Secondly, in the light of the concerns that caused the delay in the laying of the regulations, I believe that the Departments involved could have paid a greater compliment to this House if they had agreed the transitional compensation arrangements before this debate, rather than opening negotiations on them three days after the debate has taken place, which is asking quite a lot of the faith of hon. Members whose constituencies are directly affected.
Thirdly, events have moved on since the Social Security Advisory Committee report, but to use language at its most neutral, it was a deeply sceptical document. The comparative lack of preparedness for the difficult questions in December leaves me continuing to be sceptical about how things will turn out on the night. In particular, I remind the House of what happened in 1988, when withdrawal of benefits from 16 to 17-year-olds occurred. That we eventually pulled back the number of rough sleepers which that created was partly due to the special hardship provisions, which do not apply in this case, and partly due to the rough sleepers initiative.
Much has been made of the parallel that benefits are denied to citizens of this country while appeals are being heard on the benefits decisions that went against them. But if they are later successful, their claims are backdated. No such relief will be available to voluntary agencies or friends who help an asylum seeker during his appeal. Of course I understand that only 4 per cent. of appeals succeed, and much is made of the fact that 96 per cent. fail, but are the 4 per cent. to be penalised because others, with whom they have no connection save that of category, are expected to fail? The fact that, even if successful in their appeals, they continue to lose benefit if the Home Office appeals against the appeal determination has a touch of Kafka about it.
My right hon. Friends assure me in essence that my fears are groundless, but if they are not, it is on the streets of my constituency, not on the streets of theirs, that this tragedy will be played out. One of my favourite military quotations comes from a British brigadier in Korea, who I believe died last year. He said of his Korean allies:
I'm not going to have them executing people on my doorstep.
Mutatis mutandis, those are my views, too.
Thus, given that the preparations have not instilled confidence that everything is going to turn out precisely as the Government intend, I cannot give my vote to the Government tonight. What I can do is to give them the benefit of the doubt and not go into the Lobby against them. The benefit of the doubt is afforded to the Government in part because of the cack-handedness of the Opposition: not just because they have settled for a 90-minute debate, though if I were an asylum seeker I would regard that as casual, nor simply because the present arrangements cause genuine problems for race relations—many of my constituents in all honour believe that they are less well treated than the asylum seekers themselves—but most of all, if the Government do not attach sufficient importance to the 4 per cent. who win their appeals, the Opposition seem to see no problem at all in the significance of the 96 per cent. who do not.

Mr. Keith Bradley: This important but all too short debate has raised fundamental issues regarding the rights of genuine asylum seekers coming to this country. The Opposition recognise that there is a problem in dealing with large numbers of asylum applications, but we do not accept that the measures in these regulations are the correct way of dealing with the problem.
In particular, as a first step, we strongly believe that attention must be focused on the administrative procedures for dealing with applications in order to reduce the unacceptably long delays, many of which appear to be due entirely to gross inefficiency on the part of the Home Office, and the Government's general failure to implement fully the provisions of the Asylum and Immigration Appeals Act 1993.
As the DSS explanatory memorandum on the regulations confirms, it currently takes an average of 18.4 months fully to resolve an asylum application, including any appeal to the immigration authority—in stark contrast with the 1993 Act's target of a maximum of three months. When the Minister replies, will he tell us what action will be taken to increase the efficiency of those procedures? Increased efficiency in itself would reduce the burden on the social security budget.
The Government highlighted the fact that many so-called "bogus" asylum seekers make an application after entry into the United Kingdom. Again, the DSS explanatory memorandum on the regulations omitted to mention—as my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) said, the regulations make no allowance for this—that those who are genuinely fleeing persecution may have legitimate and wholly understandable reasons other than a change of circumstances for applying for asylum only after entering the country rather than on arrival: for example, to seek the help and support of relatives and friends before putting their fate into the hands of officialdom. It should be noted that people who do not speak English are often not interviewed in detail on arrival, when an interpreter is not available, but are asked to return to the airport after a few days, when an interpreter will be available.
It is apparent that the majority of genuine after-entry asylum seekers make their applications within a few days, for precisely the reasons that I have given. In that context, it is important to note that in the past the Home Office granted asylum to many after-entry asylum seekers. The Secretary of State tried to deny the figures tonight, but between 1992 and 1994 a total of 2,495 or 6.6 per cent. of after-entry applications were granted asylum, compared with a total of 1,040 or 4.9 per cent. of port applicants. It is reasonable to conclude that all the 2,495 applicants had genuine reasons for seeking asylum after entry into the United Kingdom. The figures show that the Secretary of State is quite wrong to claim, as he did today and in the response to the Social Security Advisory Committee, that the proportion of those recognised as refugees is lower for in-country applicants. Will the Minister comment on those figures when he winds up?
It is still unclear what the extra cost and burden will be on local authorities, for example, for taking children into care under the Children Act 1989. We know now that they will not receive a 100 per cent. rebate. What percentage will they get, and will the money be ring-fenced?
Representations against the regulations have been received from local authorities throughout the country and from many organisations representing the welfare and rights of genuine asylum seekers. The fears and concerns of organisations ranging from the Church, Amnesty International, Disability Alliance, the Child Poverty Action Group, the Refugee Council, Shelter, the Law Society and many others have not been satisfactorily addressed by the Government. The Government's own Social Security Advisory Committee told them not to proceed. We accept the arguments of those organisations, and will vote against the regulations tonight.

The Minister for Social Security and Disabled People (Mr. Alistair Burt): Let me briefly remind the House of some of the salient points behind the regulations. First, no one has given proper weight to the fact that the regulations take place against widespread changes in the world which have made economic migration a factor at the end of the 20th century which it never was before. There is ease of communication and travel. I recall The Economist predicting at the beginning of the decade that the 1990s might be the decade of economic migration and that it would affect Europe considerably. We have heard no mention of that.
Secondly, we are dealing with a more than tenfold increase in the number of asylum applications in this country over a 10-year period. In 1984, there were 2,905 applications for asylum. Last year, there were some 40,000. Some 13,000 dependent people were with those asylum seekers. Not only are there £200 million-worth of social security costs, but each asylum seeker is considered to cost about £6,000 a year in other expenditure.
Thirdly, there is a widespread view among groups as diverse as Amnesty International and the Select Committee on. Social Security that there is a widespread problem. It is naive to believe that the British benefit and immigration systems have played no part in the rise in numbers that we have seen. At the same time as there have been increases in applications to Britain, there have been decreases in applications to those of our European neighbours who have applied some measure of control to asylum applications.
With regard to benefit, we seek to distinguish not only between those who are genuine and those who are not, but between those who, when they apply at the port, palpably with nothing, who should be supported, and those who apply later. More than 60 per cent. of those applying for asylum apply more than two months after they have come into the United Kingdom. That information has been provided in a parliamentary answer. We seek to make that distinction because, having said that they had the means to look after themselves while they were here, they should be held to that.
The British people wish to see—

It being half-past Eleven o'clock, MADAM DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 15 (Delegated Legislation (negative procedures)).

The House divided: Ayes 264, Noes 279.

Division No. 34]
[11.30 pm


AYES


Abbott, Ms Diane
Burden, Richard


Adams, Mrs Irene
Byers, Stephen


Ainger, Nick
Caborn, Richard


Ainsworth, Robert (Cov'try NE)
Callaghan, Jim


Allen, Graham
Campbell, Mrs Anne (C'bridge)


Alton, David
Campbell, Menzies (Fife NE)


Anderson, Donald (Swansea E)
Campbell, Ronnie (Blyth V)


Anderson, Ms Janet (Ros'dale)
Campbel-Savours, D N


Armstrong, Hilary
Canavan, Dennis


Ashdown, Rt Hon Paddy
Cann, Jamie


Ashton, Joe
Carlile, Alexander (Montgomery)


Austin-Walker, John
Chidgey, David


Banks, Tony (Newham NW)
Chisholm, Malcolm


Barnes, Harry
Clapham, Michael


Battle, John
Clark, Dr David (South Shields)


Beckett, Rt Hon Margaret
Clarke, Eric (Midlothian)


Beith, Rt Hon A J
Clarke, Tom (Monklands W)


Bell, Stuart
Clelland, David


Benn, Rt Hon Tony
Clwyd, Mrs Ann


Bennett, Andrew F
Coffey, Ann


Benton, Joe
Cohen, Harry


Bermingham, Gerald
Connarty, Michael


Berry, Roger
Cook, Frank (Stockton N)


Betts, Clive
Cook, Robin (Livingston)


Boateng, Paul
Corbett, Robin


Bradley, Keith
Corbyn, Jeremy


Bray, Dr Jeremy
Corston, Jean


Brown, Gordon (Dunfermline E)
Cousins, Jim


Bruce, Malcolm (Gordon)
Cunningham, jim (Covy SE)





Cunningham, Rt Hon Dr John
Keen, Alan


Cunningham, Roseanna
Kennedy, Charles (Ross,C&S)


Dafis, Cynog
Kennedy, Jane (L'pool Br'dg'n)


Dalyell, Tam
Khabra, Piara S


Darling, Alistair
Kilfoyle, Peter


Davidson, Ian
Kirkwood, Archy


Davies, Bryan (Oldham C'tral)
Lestor, Joan (Eccles)


Davies, Chris (L'Bord & S'worth)
Liddell, Mrs Helen


Davies, Rt Hon Denzil (Llanelli)
Litherland, Robert


Davies, Ron (Caerphilly)
Livingstone, Ken


Denham, John
Llwyd, Elfyn


Dewar, Donald
Loyden, Eddie


Dixon, Don
Lynne, Ms Liz


Dobson, Frank
McAllion, John


Dowd, Jim
McAvoy, Thomas


Eagle, Ms Angela
McCartney, Ian


Eastham, Ken
McCartney, Robert


Etherington, Bill
McCrea, The Reverend William


Evans, John (St Helens N)
McFall, John


Ewing, Mrs Margaret
McKelvey, William


Fatchett, Derek
McLeish, Henry


Faulds, Andrew
Maclennan, Robert


Field, Frank (Birkenhead)
McMaster, Gordon


Flynn, Paul
McNamara, Kevin


Foster, Rt Hon Derek
MacShane, Denis


Foster, Don (Bath)
McWilliam, John


Foulkes, George
Madden, Max


Fyfe, Maria
Maddock, Diana


Galbraith, Sam
Mahon, Alice


Galloway, George
Mandelson, Peter


Gapes, Mike
Marek, Dr John


Garrett, John
Marshall, David (Shettleston)


George, Bruce
Martin, Michael J (Springburn)


Gerrard, Neil
Martlew, Eric


Gilbert, Rt Hon Dr John
Maxton, John


Godman, Dr Norman A
Meacher, Michael


Godsiff, Roger
Meale, Alan


Golding, Mrs Llin
Michael, Alun


Gordon, Mildred
Michie, Bill (Sheffield Heeley)


Graham, Thomas
Michie, Mrs Ray (Argyll & Bute)


Grant, Bernie (Tottenham)
Milburn, Alan


Griffiths, Nigel (Edinburgh S)
Miller, Andrew


Griffiths, Win (Bridgend)
Mitchell, Austin (Gt Grimsby)


Grocott, Bruce
Moonie, Dr Lewis


Gunnell, John
Morgan, Rhodri


Hall, Mike
Morley, Elliot


Hanson, David
Mons, Rt Hon Alfred (Wy'nshawe)


Harvey, Nick
Morris, Estelle (B'ham Yardley)


Hattersley, Rt Hon Roy
Morris, R Hon John (Aberavon)


Henderson, Doug
Mucle, George


Heppell, John
Mullin, Chris


Hinchliffe, David
Murphy, Paul


Hodge, Margaret
Nicholson, Emma (Devon West)


Hoey, Kate
Oakes, Rt Hon Gordon


Home Robertson, John
O'Brien, Mike (N W'kshire)


Hood, Jimmy
O'Brien, William (Normanton)


Hoon, Geoffrey
Oiner, Bill


Howarth, Alan (Strat'rd-on-A)
O'Neill, Martin


Howarth, George (Knowsley North)
Orme, Rt Hon Stanley


Howells, Dr Kim (Pontypridd)
Pearson, Ian


Hoyle, Doug
Pendry, Tom


Hughes, Robert (Aberdeen N)
Pickthall, Colin


Hughes, Simon (Southwark)
Pike, Peter L


Hume, John
Pope, Greg


Hutton, John
Powell, Ray (Ogmore)


Illsley, Eric
Prentice, Bridget (Lew'm E)


Ingram, Adam
Prentice, Gordon (Pendle)


Jackson, Glenda (H'stead)
Prescott, Rt Hon John


Jackson, Helen (Shef'ld, H)
Primarolo, Dawn


Jamieson, David
Purchase, Ken


Jones, Barry (Alyn and D'side)
Quin, Ms Joyce


Jones, Jon Owen (Cardiff C)
Randall, Stuart


Jones, Lynne (B'ham S O)
Raynsford, Nick


Jones, Martyn (Clwyd, SW)
Reid, Dr John


Jones, Nigel (Cheltenham)
Rendel, David


Kaufman, Rt Hon Gerald
Robertson, George (Hamilton)






Robinson, Geoffrey (Co'try NW)
Sutcliffe, Gerry


Roche, Mrs Barbara
Taylor, Mrs Ann (Dewsbury)


Rogers, Allan
Taylor, Matthew (Truro)


Rooker, Jeff
Timms, Stephen


Ross, Ernie (Dundee W)
Tipping, Paddy


Rowlands, Ted
Touhig, Don


Ruddock, Joan
Tyler, Paul


Salmond, Alex
Vaz, Keith


Sedgemore, Brian
Walker, Rt Hon Sir Harold


Sheerman, Barry
Wallace, James


Sheldon, Rt Hon Robert
Walley, Joan


Shore, Rt Hon Peter
Wardell, Gareth (Gower)


Short, Clare
Wareing, Robert N


Simpson, Alan
Watson, Mike


Skinner, Dennis
Welsh, Andrew


Smith, Andrew (Oxford E)
Wicks, Malcolm


Smith, Chris (Isl'ton S & F'sbury)
Wigley, Dafydd


Smith, Llew (Blaenau Gwent)
Williams, Rt Hon Alan (Sw'n W)


Snape, Peter
Williams, Alan W (Carmarthen)


Soley, Clive
Wilson, Brian


Spearing, Nigel
Winnick, David


Spellar, John
Wise, Audrey


Squire, Rachel (Dunfermline W)
Worthington, Tony


Steel, Rt Hon Sir David
Wright, Dr Tony


Steinberg, Gerry
Young, David (Bolton SE)


Stevenson, George



Stott, Roger
Tellers for the Ayes:


Strang, Dr. Gavin
Mr. Peter Hain and


Straw, Jack
Mr. Dennis Turner.


NOES


Ainsworth, Peter (East Surrey)
Churchill, Mr


Aitken, Rt Hon Jonathan
Clappison, James


Alison, Rt Hon Michael (Selby)
Clark, Dr Michael (Rochford)


Amess, David
Clarke, Rt Hon Kenneth (Ru'clif)


Ancram, Rt Hon Michael
Clifton-Brown, Geoffrey


Arbuthnot, James
Coe, Sebastian


Arnold, Jacques (Gravesham)
Congdon, David


Ashby, David
Conway, Derek


Atkins, Rt Hon Robert
Coombs, Anthony (Wyre For'st)


Atkinson, Peter (Hexham)
Coombs, Simon (Swindon)


Baker, Rt Hon Kenneth (Mole V)
Couchman, James


Baker, Nicholas (North Dorset)
Cran, James


Baldry, Tony
Currie, Mrs Edwina (S D'by'ire)


Banks, Robert (Harrogate)
Curry, David (Skipton & Ripon)


Bates, Michael
Davies, Quentin (Stamford)


Batiste, Spencer
Davis, David (Boothferry)


Bellingham, Henry
Day, Stephen


Bendall, Vivian
Deva, Nirj Joseph


Beresford, Sir Paul
Devlin, Tim


Biffen, Rt Hon John
Dorrell, Rt Hon Stephen


Body, Sir Richard
Douglas-Hamilton, Lord James


Bonsor, Sir Nicholas
Dover, Den


Booth, Hartley
Duncan, Alan


Boswell, Tim
Duncan-Smith, Iain


Bottomley, Peter (Eltham)
Dunn, Bob


Bottomley, Rt Hon Virginia
Durant, Sir Anthony


Bowden, Sir Andrew
Dykes, Hugh


Bowls, John
Eggar, Rt Hon Tim


Boyson, Rt Hon Sir Rhodes
Elletson, Harold


Brandreth, Gyles
Emery, Rt Hon Sir Peter


Brazier, Julian
Evans, David (Welwyn Hatfield)


Bright, Sir Graham
Evans, Jonathan (Brecon)


Brown, M (Brigg & Cl'thorpes)
Evans, Nigel (Ribble Valley)


Browning, Mrs Angela
Evans, Roger (Monmouth)


Bruce, Ian (Dorset)
Evennett, David


Burt, Alistair
Faber, David


Butcher, John
Fabricant, Michael


Butler, Peter
Field, Barry (Isle of Wight)


Butterfill, John
Fishburn, Dudley


Carlisle, John (Luton North)
Forman, Nigel


Carlisle, Sir Kenneth (Lincoln)
Forsyth, Rt Hon Michael (Stirling)


Carrington, Matthew
Forth, Eric


Carttiss, Michael
Fowler, Rt Hon Sir Norman


Cash, William
Fox, Dr Liam (Woodspring)


Chapman, Sir Sydney
Fox, Rt Hon Sir Marcus (Shipley)





Freeman, Rt Hon Roger
McNair-Wilson, Sir Patrick


French, Douglas
Madel, Sir David


Gale, Roger
Maitland, Lady Olga


Gallie, Phil
Malone, Gerald


Gardiner, Sir George
Mans, Keith


Garnier, Edward
Marlow, Tony


Gill, Christopher
Marshall, John (Hendon S)


Gillan, Cheryl
Marshall, Sir Michael (Arundel)


Goodlad, Rt Hon Alastair
Mates, Michael


Goodson-Wickes, Dr Charles
Mawhinney, Rt Hon Dr Brian


Gorman, Mrs Teresa
Mayhew, Rt Hon Sir Patrick


Gorst, Sir John
Mellor, Rt Hon David


Grant, Sir A (SW Cambs)
Merchant, Piers


Greenway, Harry (Ealing N)
Mitchell, Andrew (Gedling)


Greenway, John (Ryedale)
Mitchell, Sir David (NW Hants)


Griffiths, Peter (Portsmouth, N)
Moate, Sir Roger


Grylls, Sir Michael
Monro, Rt Hon Sir Hector


Gummer, Rt Hon John Selwyn
Montgomery, Sir Fergus


Hague, Rt Hon William
Needham, Rt Hon Richard


Hamilton, Rt Hon Sir Archibald
Neubert, Sir Michael


Hamilton, Neil (Talton)
Newton, Rt Hon Tony


Hampson, Dr Keith
Nicholls, Patrick


Hanley, Rt Hon Jeremy
Nicholson, David (Taunton)


Hannam, Sir John
Norris, Steve


Hargreaves, Andrew
Onslow, Rt Hon Sir Cranley


Harris, David
Oppenheim, Phillip


Hawkins, Nick
Ottaway, Richard


Hawksley, Warren
Page, Richard


Hayes, Jerry
Paice, James


Heald, Oliver
Patten, Rt Hon John


Heathcoat-Amory, Rt Hon David
Pattie, Rt Hon Sir Geoffrey


Hendry, Charles
Pawsey, James


Heseltine, Rt Hon Michael
Peacock, Mrs Elizabeth


Hicks, Robert
Porter, Barry (Wirral S)


Higgins, Rt Hon Sir Terence
Porter, David (Waveney)


Hogg, Rt Hon Douglas (G'tharn)
Powell, William (Colby)


Horam, John
Redwood, Rt Hon John


Hordem, Rt Hon Sir Peter
Renton, Rt Hon Tim


Howard, Rt Hon Michael
Richards, Rod


Hughes, Robert G (Harrow W)
Riddick, Graham


Hunt, Rt Hon David (Wirral W)
Rifkind, Rt Hon Malcolm


Hunter, Andrew
Robathan, Andrew


Jack, Michael
Roberts, Rt Hon Sir Wyn


Jackson, Robert (Wantage)
Robertson, Raymond (Ab'd'n S)


Jenkin, Bernard
Robinson, Mark (Somerton)


Jessel, Toby
Roe, Mrs Marion (Broxbourne)


Johnson Smith, Sir Geoffrey
Rowe, Andrew (Mid Kent)


Jones, Gwilym (Cardiff N)
Rumbold, Rt Hon Dame Angela


Jones, Robert B (W Hertfdshr)
Sackville, Tom


Jopling, Rt Hon Michael
Sainsbury, Rt Hon Sir Timothy


Kellett-Bowman, Dame Elaine
Scott, Rt Hon Sir Nicholas


Key, Robert
Shaw, David (Dover)


King, Rt Hon Tom
Shaw, Sir Giles (Pudsey)


Kirkhope, Timothy
Shephard, Rt Hon Gillian


Knapman, Roger
Shepherd, Richard (Aldridge)


Knight, Mrs Angela (Erewash)
Sims, Roger


Knight, Rt Hon Greg (Derby N)
Skeet, Sir Trevor


Knight, Dame Jill (Bir'm E'stn)
Smith, Tim (Beaconsfield)


Knox, Sir David
Soames, Nicholas


Kynoch, George (Kincardine)
Spencer, Sir Derek


Lait, Mrs Jacqui
Spicer, Sir James (W Dorset)


Lamont, Rt Hon Norman
Spicer, Sir Michael (S Worcs)


Lang, Rt Hon Ian
Spink, Dr Robert


Lawrence, Sir Ivan
Spring, Richard


Legg, Barry
Sproat, Iain


Leigh, Edward
Squire, Robin (Hornchurch)


Lennox-Boyd, Sir Mark
Stanley, Rt Hon Sir John


Lidington, David
Steen, Anthony


Lilley, Rt Hon Peter
Stephen, Michael


Lloyd, Rt Hon Sir Peter (Fareham)
Stern, Michael


Lord, Michael
Stewart, Allan


Luff, Peter
Sumberg, David


Lyell, Rt Hon Sir Nicholas
Sweeney, Walter


MacKay, Andrew
Sykes, John


Maclean, Rt Hon David
Tapsell, Sir Peter


McLoughlin, Patrick
Taylor, Ian (Esher)






Taylor, John M (Solihull)
Ward, John


Taylor, Sir Teddy (Southend, E)
Wardle, Charles (Bexhill)


Temple-Morris, Peter
Waterson, Nigel


Thomason, Roy
Watts, John


Thompson, Sir Donald (C'er V)
Wells, Bowen


Thompson, Patrick (Norwich N)
Whitney, Ray


Thomton, Sir Malcolm
Whittingdale, John


Thumham, Peter
Widdecombe, Ann


Townsend, Cyril D (Bexl'yh'th)
Wiggin, Sir Jerry


Tracey, Richard
Wilkinson, John


Tredinnick, David
Willetts, David


Trend, Michael
Wilshire, David


Trotter, Neville
Winterton, Mrs Ann (Congleton)


Twinn, Dr Ian
Winterton, Nicholas (Macc'fld)


Vaughan, Sir Gerard
Wood, Timothy


Viggers, Peter
Yeo, Tim


Waldegrave, Rt Hon William
Young, Rt Hon Sir George


Walden, George



Walker, Bill (N Tayside)
Tellers for the Noes:


Waller, Gary
Mr. Simon Burns and



Mr. Gary Streeter.

Question accordingly negatived.

Orders of the Day — Mr. Amarjit Singh

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wells.]

Sir Trevor Skeet: I want to raise the case of Mr. Amarjit Singh, who wishes to come to this country to see his grandmother who has terminal cancer. He has made three applications—one on 17 August 1993, another on 24 October 1994 and a third on 28 March 1995—all of which have been refused. Many of the reasons that have been given for refusal are, in my judgment, insubstantial.
An example of that with the third application was the allegation that Mr. Singh did not have full knowledge of his grandmother's illness—yet he received his information from the high commission doctor, so that should have been adequate. It was also said that there was no evidence confirming his business in India or that he had lived with his grandmother since the death of his father in 1979.
The sick lady, Mrs. Seso Kaur, wrote to me on 25 April 1995 saying:
I brought up my grandson from a toddler when his father … died. I even gave up my work in a local school so that my daughter-in-law [Amarjit's mother] could take my place to earn some money in order to raise her family.
It is worth observing that the other argument that was advanced related to the paternal uncle. It was suggested that there was no reason why Amarjit Singh should visit his grandmother to the exclusion of the paternal uncle and other, closer, relatives. That argument was adequately answered by the consultant, Dr. K. Farrington, in his letter of 2 November 1994. He said of the sick lady:
She has a strong desire to see her grandson, Amarjit Singh, whom she brought up from a baby and who lived with her until she came to this country 6 years ago and for whom she naturally feel close ties and affection.
It is apparent that some of the reasons for refusal were thin indeed.
On 5 September 1995, the sick lady wrote:
It would seem there is no end to the tragedy in my family. You are already aware of Amarjit's father's death. And now his mother, Mrs. Joginder Kaur has also died on the 28/8/1995. I am now extremely worried not only about Amarjit but also about his younger sister Usha Devi who is 17 years old.
It is rather interesting in such a case to have blatant refusals from the high commission in India, which is supposed to be doing a proper job.
I want to refer to the medical condition of Mrs. Kaur. There have been seven communications, three of them to the high commission in New Delhi—the communications by consultant J. H. B. Saunders on 1 December 1992; by Dr. Agrawal, the GP to the high commission, on 5 October 1994 on the lady's medical condition; and from Maria Eckford, social worker to the high commission, on 1 October 1994. The high commission was apprised of the situation and of the lady's deteriorating circumstances as far back as 1992, yet there have been constant refusals.
It may be important for me to bring the House up to date. On 3 January 1996, consultant Ken Farrington BSc MD FRCB wrote:
Further to my previous letters about this lady, I am writing to advise you of a change in her circumstances. She has now developed a recurrence of her carcinoma of the gall-bladder. I am afraid her


prognosis is now very poor and very limited to weeks. She is still desperate to see her grandson and I would appeal to you to do all you can to ensure that this is possible in the required time-scale.
In his earlier letter of 24 November 1995, Dr. Farrington said that Mrs. Kaur had chronic renal failure and had been receiving haemodialysis programmes since September 1994. An earlier letter gives a good indication of the way Dr. Farrington feels about the matter. In his letter of 19 December 1994, he wrote:
I was appalled to hear that this man's Visa application to visit his grandmother in the UK has been refused, in spite of my strong support … I would urge you most strongly to grant this Visa to allow this humanitarian visit as soon as possible.
I need hardly say that the consultant has responded most positively, and I give him full marks for the attention that he has paid to this case. He wrote me no fewer than six letters—on 2 November 1994, 19 December 1994, 11 January 1995, 19 April 1995, 24 November 1995 and 3 January 1996.
It would seem to be an overwhelming case, and I am grateful to my right hon. Friend the Minister for coming here tonight to put forward the case for the defence for the entry clearance officer in New Delhi. For humanitarian reasons, we should consider this case much more deeply than it has been considered up to now. Two Ministers have been involved, and I have seen both on the matter. I am grateful to the present Minister for writing to me on 22 January.
I shall put certain specific points to my right hon. Friend, as I want to give him a full opportunity to state his case. There is no need to interview Mr. Singh again, as three rejections have been made on rather insubstantial grounds. There is no proof of guilt—only suspicion. The compassionate case now outweighs any doubts about the attitude of Mr. Singh, which can be explained by family distress. If there is any further delay, the course of the disease is liable to overtake any further consultation. Innocent cases are apt to be sacrificed, while international swindlers manage to foil the most skilful diplomats.
I make my final plea to the Minister. On grounds of pure humanity, it his duty to overrule the entry clearance officer who has found it difficult to see beyond the paper before him. The question is whether my right hon. Friend has the courage to use his discretion.
When we set up an instrument for very good reasons—checking visas at the place of origin to find out whether people are entitled to come for a short stay in the United Kingdom—certain aberrations creep in. The bureaucrats intervene and humanity is disregarded.
In cases such as this—I have tried to settle it with the Minister, but have had to make it public—my right hon. Friend has a way out. He can get assurances from the family, from the temple to which this man is attached and from me that he will return on the date indicated. My right hon. Friend can also lay down conditions for his stay in the United Kingdom. He can say that he is not entitled to come here for three months, but can stay for only one week—or 10 day—and must report to the police every day and return at the end of the stay.
That would make the visit possible and enable my right hon. Friend to meet the interests of a lady who is dying and making her final plea to the state in defence of which he will speak tonight.

The Minister of State, Foreign and Commonwealth Office (Mr. Jeremy Hanley): My hon. Friend the Member for North Bedfordshire (Sir T. Skeet) raises some important issues, and I welcome this opportunity to comment on the operation of our entry clearance system overseas and to make some points about the Singh case, although, as I hope that the House will understand, I am constrained from discussing that in great detail for reasons of confidentiality towards the applicant. I am particularly grateful to my hon. Friend for the regular courtesy in the way in which he has expressed himself to my predecessor and myself.
First, some general points. Operating cost-effective immigration controls abroad entails facilitating the entry of genuine visitors. We need to facilitate the entry of business people, students and others who qualify under the immigration rules, while preventing the admission of those whose real intention is to work or settle here illegally.
I am conscious of the fact that business and tourist visitors provide a significant proportion of this country's invisible earnings. The United Kingdom is the world's sixth largest tourist destination, with about 20.6 million visits in 1994, and it is the third largest destination for international conferences.
The tourism industry contributes 5.3 per cent. of gross domestic product and creates 1.5 million jobs, so it would clearly be foolhardy to operate a visa-issuing system that was so restrictive or obstructive that it damaged such an important contribution to our national economy. Obviously, we are careful to avoid doing so, as becomes clear from a glance at the figures.
In 1994—the last full year for which figures are available—out of the 20.6 million visits, our embassies and consular posts overseas processed 1.32 million visa applications. More than 1 million of those applications were for short-term entry clearance, either to visit this country or to study here for a period of less than six months. Of that number, just over 900,000–901,560 for the record—visas were issued, mostly on examination of the paperwork or after an interview lasting less than three minutes. I regard that as providing an efficient and professional service to travellers.
Entry clearance is carried out in 159 posts and accounts for 9.3 per cent. of Foreign and Commonwealth Office expenditure overseas. After the introduction of the common visa list later this year, that is likely to rise to 10.13 per cent. Entry clearance work is demand-led but fees for entry clearance work covered 83 per cent. of its cost in 1993–94 and it is Government policy to move eventually to self-sufficiency on a full-cost basis.
The level of entry clearance fees, which is reviewed annually, was last raised in January 1995. The fee for a settlement entry clearance will increase in two further stages to achieve full cost recovery in 1997–98. Work in 1994–95 required 915 man-years of staff time and generated £38 million in entry clearance fees.
At present, nationals of 87 countries require visas to enter the United Kingdom, but that figure will rise to 101 as a result of the common visa list. Our visa operation overseas is managed from the London end by the migration and visa department of the Foreign and Commonwealth Office, which, in conjunction with the immigration service of the Home Office, runs 10 training


courses a year for 120 to 140 prospective entry clearance officers. Each course lasts for three weeks, at the end of which time officers are expected to have a clear understanding of the immigration rules and the necessary knowledge to relate each individual application to those rules. No officer is posted overseas to do entry clearance work unless he or she has successfully completed that course.
Entry clearance officers, although relatively low in rank, are people of integrity, who are fully trained for their work. However, the training of entry clearance officers does not stop with the successful completion of the training course. Once in post, officers receive guidance and on-the-job training from the entry clearance manager and from his or her more experienced colleagues. Most of our larger visa issuing posts also run regular training courses for their staff. A series of regional training conferences has been held over the past two years.
All applications for entry clearance to the United Kingdom are considered in accordance with the statement of changes in immigration rules laid before the House on 23 May 1994. All applications for entry clearance must be made overseas. Applicants are required to complete a visa application form and pay the appropriate fee. After the application and any supporting documents provided by the applicant have been checked, an entry clearance officer can, in straightforward circumstances, issue the visa without further inquiries. In fact, about 68.3 per cent. of all applicants are dealt with in that way.
The balance of applicants are required to attend an interview to establish their intentions. Those who are unable to speak or understand English are interviewed in their own language with the aid of an official interpreter. At the beginning and end of the interview, the applicant is asked whether he or she could understand the interpreter and the questions. If there is no official interpreter, arrangements can be made for interpretation. A personal interview is thus an essential part of the entry clearance process where the application is less than straightforward.
Interviews are conducted according to standard guidelines and are designed not to intimidate or otherwise distress applicants. ECOs endeavour to ask questions in a courteous and tactful way and make allowances for applicants who appear nervous, especially those who have previously been refused entry clearance.
It is regrettable that not all applications are successful, but it is important to keep a sense of proportion about the refusal rate. In 1994, we issued about 1 million visas, and over 90 per cent. of those who applied for entry clearance were granted it. I should add that a decision to refuse entry clearance is never taken lightly. I can assure my hon. Friend that, in reaching their decisions, entry clearance officers take all the relevant factors into account, including information supplied by right hon. and hon. Members and by sponsors. Correspondence is also taken into account. I have seen the files. I have seen files at many posts throughout the world. I make a point of looking at files and the evidence written down by ECOs at interviews. It strikes me that, ultimately, the applicant's motives and intentions decide whether entry clearance is granted. That is so in the case of Mr. Amarjit Singh.
The facts of the case—I repeat that these are the facts that I am prepared to give tonight for privacy reasons—are that Mr. Amarjit Singh has applied three times for entry clearance to visit his seriously ill grandmother. There is no doubt of that. But he has failed to satisfy an entry clearance officer on each occasion that he genuinely seeks entry only for the purpose and period stated, that he is a genuine visitor and will leave the United Kingdom at the end of his visit.
As my hon. Friend said, entry clearance was refused in August 1993, October 1994 and March 1995. At interview, the entry clearance officer learned of the compassionate nature of the case. It also emerged that Mr. Singh is young—he is 25 years old—and earns a modest monthly income. He told the ECO that an aunt living in the UK helped to support the family in India and would pay for his visit. Mrs. Kaur also has closer relatives living in India who have not applied for entry clearance to visit her.
My hon. Friend has been assiduous in pursuing this matter with my Department. No hon. Member could have done more. He has written several times in support of the application and had a meeting with my predecessor on 6 February 1995 to discuss it personally. He had another meeting with me on 4 December 1995. He handed over additional evidence of the deteriorating health of Mr. Singh's grandmother, Mrs. Seso Kaur, which was passed to the ECO. But that does not necessarily say anything about Mr. Singh's intention to return to India.
The ECO was aware of the compassionate circumstances—Mr. Singh's grandmother's illness—and took that into consideration. But he also had to take into account Mr. Singh's personal circumstances in India and other factors that emerged at interview. As in all cases where an application is refused, the decision on Mr. Singh's latest application was referred to the entry clearance manager in New Delhi. He also gave proper consideration to the compassionate circumstances and to my hon. Friend's representations of interest and support, but was satisfied that, on the evidence available, the decision was correct and in accordance with the immigration rules. It is not reasonable to review a case that has already been thoroughly evaluated in the light of my hon. Friend's strong representations since 1993 without fresh evidence.
The judgment of those two officers was applied independently to the question whether, on the balance of probabilities, Mr. Singh was a genuine visitor who would leave the UK at the end of his visit. Using the balance of probabilities as the benchmark means that an ECO must be "satisfied". That is all. He need not be convinced outright or subject to gilt-edged, copper-bottomed assurances or guarantees, but simply satisfied.
The balance of probabilities works like any other balance: if one puts more weight in the form of new evidence on one end of the scales, they will tilt in a different direction. That is the way forward in this case, and my hon. Friend mentioned certain details that could be useful on a further application. A fresh application based on satisfactory evidence that only a visit is intended could be helpful.

Sir Trevor Skeet: In his letter to me, my right hon. Friend said:


As mentioned in my letter of 15 January, the way forward is for Mr. Singh to submit a fresh application which can be considered by an ECO. You will appreciate that I cannot guarantee the outcome in advance. That will be a decision for the Entry Clearance Section at New Delhi.
Time is short. Such cases can go remarkably fast. Is my right hon. Friend prepared to assure me that, if an application is made, Mr. Singh can, if authorised, come to this country within a week?

Mr. Hanley: If a fresh application is made, I can assure my hon. Friend that the entry clearance officer will look at the evidence as presented to him. The evidence that my hon. Friend listed in his contribution this evening could well help to tip the balance, but I cannot say that. It is for the entry clearance officer to come to a conclusion and for the entry clearance manager subsequently to consider it.
I sometimes have reason to write to hon. Members expressing disappointment that, despite protestations to the contrary beforehand, an applicant granted a visa in the light of an hon. Member's intervention has subsequently applied to remain here permanently. It pains me to have to embarrass hon. Members in such a way, but it illustrates the fact that hon. Members are as capable as anyone else of being deceived. I do not necessarily believe that in the case of my hon. Friend; I believe in his total sincerity.
If the evidence that my hon. Friend mentioned in tonight's debate is given in writing, perhaps we can look at it again. It is for the ECO to look at that; it would be wrong for me, merely because of pressure from my hon. Friend, to make a decision and to make a statement in the House. It would mean that justice was subject to pressure—perhaps even bullying, although my hon. Friend could never be called a bully, because he makes his points so courteously.

Sir Trevor Skeet: Under the rules, the Minister has a discretion. In 32 years in the House I have noticed hard cases, but I think that this is the hardest case. The Minister could exercise his discretion and overrule the ECO. He could decide that the case is now serious; he should consult the consultant; he should take into account what the family think about it; he should pin his researcher down to a briefer period. I should have thought that on that basis he would be adequately covered. Has he any proof over the 30 years of serious mistakes that I have made in evaluating people who come to me?

Mr. Hanley: As the Minister responsible for entry clearance matters arising overseas, I am occasionally

asked to reverse ECOs' decisions, but I rarely feel able to do so. It is unnecessary, because adequate safeguards already exist to ensure that the decision that is made is fair. ECOs' decisions are subject to review routinely by the next tier of management and randomly through the offices of the independent monitor Dame Elizabeth Anson.
Dame Elizabeth was appointed under the Asylum and Immigration Appeals Act 1993, with terms of reference that require her to take a sample of about 1,800 refusals a year drawn randomly by an established statistical formula. Only rarely, therefore, will there be any reason for ministerial intervention in the decision-making process. Normally, the immigration rules must be followed. But when new evidence is presented, representations can and do result in the ECO reversing the decision without the need for any ministerial involvement. In her 1995 report, Dame Elizabeth said that she had received a number of letters from right hon. and hon. Members who have been successful in obtaining a favourable decision.
I have visited a number of entry clearance posts and found them to be staffed by well-motivated officers who are anxious to be seen to apply an immigration procedure that is firm but fair. I have visited the entry clearance office in New Delhi; I have met the entry clearance manager and the majority of entry clearance officers. I am impressed with their genuineness and assiduousness—as was my right hon. and learned Friend the Home Secretary when he visited that office in New Delhi. There has been a staggering change in that office in the 10 years since I was last there. We now treat people, not just as humans, but in comfort and compassionately, which is vital if we are to carry out an important service, with people who deserve to be treated properly.
We still have to remember that we are dealing with humans, and human nature being what it is, there will always be those who set out to defeat the system for their own personal ends. If we treated people with suspicion from the outset, the numbers that I have mentioned would show that. The majority of people receive entry clearance, and there is the chance to make another application and, therefore, to succeed in time.
I am convinced that the entry clearance system at present in place is operated fairly.

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MADAM DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned accordingly at fourteen minutes past Twelve midnight.